Category Archives: Business Musings

Amazon and Magento integration

For those wondering what I’ve been up to, we’ve been working on a few consulting projects but mostly, our time has been taken up dealing with a switch over from M2E Pro to the BoostMyShop Amazon module for our geek sites.

There’s a few reaosns for the switchover, partly the on-going monthly charge from M2E being interacted which can significantly affect our profitability and just as much, the rather horrible support we got from them when we ran into issues attempting to switch our profiles over. Add that to the fact that their latest upgrade / update to the module (which they refeused to help further with until we did) required us to move servers and we just decided that it wasn’t worth using them anymore.

Which puts up with the BoostMyShop module. It is it’s own share of headaches.

For one thing, unlike M2E pro, the documentation is rather rubbish. There’s just no documentation on common error reports or what those error reports mean. There’s no indication why something is error’ing out, even if it shouldn’t. There’s no indication when you switch tabs how to have the system do a double-check so you kind of have to do a tril and error of hitting a bunch of buttons int he hope that it eventually works.

In addition, the system cannot accept more than one type of code – so you can’t, for example, try both UPC and EAN codes. Which is an issue if, for example, a product is only available on Amazon via their EAN code and not UPC code. You’d think it’d be a simple enough code fix, but no go.

Also, the system doesn’t really allow you to choose to use different prices (example if you have 2 or more stores, you can’t choose which specific store price you want to showcase and link to Amazon). So you kind of have to just grit your teeth and go with what seems to be the default price.

Oh, and if you add then delete a Marketplace, realise that it’s going to break your site for a bit. No help at all in their FAQs on how to fix this. Support from t he developer has been less then stellar I have to admit. Mostly I find due to the fact that the developer does not speak good English at all and as such, is not able to understand what you are asking for, so when you do have a bug to report or need information, it’s all very slow. Which isn’t great if the problem has ended up in production like the above deleting.

Is this a viable alternative to M2E Pro? So far, it’s workable I’m sure after we finish fixing it but I definitely think they need to add a lot more documentation, add more features and clean up the code a bit.

Uncertainty, costs and sales

Currently Canada Post is having it’s 5 yearly fight over wages with the Union. I’ve written about how I actually think the workers in the general Canada Post seem to be of a higher quality than what we get from UPS / FedEx/ etc. in general, many of them doing a great job with our packages and helping us do shipping.

However, this uncertainty over the whether they are going to strike / get locked out is seriously harming our e-commerce business.  We’ve seen over a 30% drop in sales with most of our single item order customers deciding not to go ahead with purchasing till this gets sorted.  As it stands, they’ve already delayed the strike for over a week now, which means we’ve been in a holding pattern in shipping for 2 weeks with our stores Starlit Citadel & Fortress Geek.

Why 2 weeks? Mostly due to the fact that it can take up to 8 business days for orders to arrive in the East Coast.   It’s amazing what a small level of uincertainity over whether your shipment is going to arrive or not does to the number of orders and what even a $5 change in shipping costs affects.

 

Developing different forms of income

It’s interesting, with our business model, we’re beginning to generate different kinds of income.  We’ve begun to take service income for logistics / kickstarter fulfilment, 3rd party sales income from selling on eBay & Amazon, income from in-person sales at conventions and at our open hours, consulting income and even passive income from our Youtube videos.  Of course, our main income source is e-Commerce still and it’ll probably continue to be our main form, but it’s certainly interesting playing around with different forms of income.

The other aspect of these different forms of income is that it helps smooth out instability in other areas.  We get advertising income from our Youtube videos and that should, over the next fewyears, continue to generate a decent amount of funds.  It’ll never be a large amount of money since we develop our videos for a niche audience in our niche business, but it’s a nice addition and often seems to be quite stable.

Perhaps the area that we’d love to exploit and develop further is service income, from our Kickstarter Fulfilment to consulting.  It’s something we’ll have to slowly develop, between working on our other businesses.

Scam Company

Just got a call from a scam company called ‘Convention Housing Authority’. Phone number of tel:+12124413140.  They were mis-representing themselves as part of the Convention we were booked for and saying ‘It was their job to make sure we had accomadations’.

If they call you after you book a hotel, don’t. Always check with your actual convention exhibitor and/or contact the hotels listed on the convention website direct yourself.

 

Competing on Price

One of the rather more challenging aspects of the game trade which we are in is the fact that online, most people compete on price.  Due to the lack of barriers to entry, a lot of people recently have been getting not the business.  That unfortunately means we are now facing increased competition, most of which are competing on price.

What that means is that we have seen is a significant decrease in revenue as price sensistive customers move to our competitors.  However, changing our business model further – decreasing our sales even further – would be a bad move.  It’s a matter of margins.  A 15% decrease in our margins to compete would require a 30% increase in our revenue.  That’s a significant number, one that we find hard to meet.

So, what can we do about it? Well, if our current customers do not work then the better option would be find new customers, ones that are not as price sensitive.

Free, flat or variable shiping costs

Let’s talk about shipping.  Now, we all know that you need to let customers or potential customers know what the cost of shipping is before they hit checkout.  So you put in the necessary shipping estimators on the shopping cart and otherwise.

However, what kind of shipping methods do you use? The various options have pros and cons.

Free shipping (pure) generally means you put the cost of the shipping items in the cost of your products. This works quite well if, for example; you have a high margin product with a low shipping cost.  It also does well if you can get customers to purchase more than 1 of the item at the time, to save on shipping costs.

However, the cons are that you generally have to put a much higher price on your product which could make you seem uncompetitive.  I’d say this type of shipping method works best for really high value products (where shipping is a small portion of your actual price) or low value products  (where you can ship the order really cheaply).

Secondly, you can do a combined free / variable shipping method. Basically, you provide free shipping at a certain level.  Now, this shipping option pushes people to purchase a certain amount and if set right, can push people to the next ‘level’ of purchasing.  This kind of method requires more calculation but in many cases can be quite profitable.

Flat rate shipping on the other hand is perhaps the easiest for customers to understand.  It’s a simple number that they can work with, but has the disadvantage of requiring to you know your shipping cost quite well.  It also means that if a customer does a large order, and a lot of customers do that, you cost is going to go much higher than you expected.  Depending on how you price it, you might also be losing money on each order.

Lastly, you have variable – or actual – cost of shipping.  Here you charge everybody the actual cost of what it costs to customer to ship. This is of course the most fair method, but the customers that you really want – the large order customers might decide to go elsewhere because other businesses are offering them free shipping.

Building a Magento site for Canada

Let’s talk about Magento and building a Magento site in Canada.  For the most part, the things that you require are going to be the same at the basic level – theme, gateways, etc.  However, there are a few things that are very specific that is needed for a Canadian store.

Shipping

You are going to need a Canada Post shipping module. Sure, you could ship via FedEx or UPS, but Canada Post is by far the cheapest system in Canada itself.  Purolator comes as a close second, but it’s still pretty expensive.  If you are shipping B2B though, I’d definitely look at either Purolator or one of the other companies rather than Canada Post as their combined shipping options (i.e. multiple parcels to same location) can drive costs down.

Accounting

You are going to need to figure out your accounting.  Now, if you are purchasing only in Canada, you don’t really need anything major or different – however, if you are importing products from the States or elsewhere, you will need to tie-in purchasing and logistics with your sales.  Quickbooks works well for this, but understand you’ll need a software to import the stock/etc in – it doesn’t connect directly very well.  Webtex is one option – but again, once you hit a certain volume of products, you’ll definitely want a better solution.

That’s where things get tricky- very few systems out there tie-in accounting with Magento very well.  Look for a dedicated system that deals with Magento and multiple currencies.

Domain names .ca

You will want a .ca domain name.  Purchasing one is pretty cheap per year – about $10 per year.  In the beginning, you might want to just redirect the .ca to your .com; but not having it is a bad idea.

Google Webmaster

Okay, here’s an interesting thing to do – make sure to connect Google Webmaster Tools to your site and then target your site to Canada.  It’s an immediate boost for your listings in Canada but

Currency / Canadaisms

Don’t forget to mention what currency you are selling everything in.  Not only is this necessary for your payment gateway, you’ll also want to keep your precious Canadian consumers on-board for longer.  Definitely consider flying the Canadian flag somewhere prominent – it’ll keep your target market on your site longer.

French / English

Have only a few products? Seriously consider putting up a French translation of your site.  It’s a great way to get customers from Quebec and help you rank higher for a certain demographic.  Of course, the problem is if you have a lot of different products, you might want to avoid this due to the huge costs of implementation.

Revenue Streams Online (2) – Affiliate Marketing

Affiliate marketing; boiled down to its essence is the process of trading eyeballs for sales on other people’s sites.  It’s not always sales – sometimes you get paid for an action (signing up to a newsletter, visiting a certain page, etc.) but it’s mostly about sales.   It’s also one of the more popular revenue streams available, so let’s do the Pros and Cons.

Pros

  • Low cost of entry. All you need is a website to start.  Once you generate the traffic, you can get the links for the various affiliate sites to develop your sales.
  • No inventory or customer service hassles
  • Can be an extremely passive form of income – once the website is up, the processing of sales/etc is left up to the affiliated company, not yours
  • Easy to enter / work with  multiple websites with multiple industries, allowing you to experiment with profitability
  • Can be mixed with other revenue streams like advertising very easily

Cons

  • Extremely competitive marketplace partly due to the low cost of entry
  • Can take a long time to develop sufficient traffic to generate decent revenue.  As you are sending traffic away, you get approximately 50% of all visitors at best to the affiliated site.  Those then convert at between 1-3%; so traffic must be significant.
  • You are dependent on 3rd party sites, for both payments as well as the processing of the orders and overall conversion rates / usability of other sites
  • As majority traffic is often generated directly from search engines / referrals (especially for smaller sized sites); you are most liable to Google algorithm changes

 

Revenue Streams Online (1) – E-Commerce

Let’s talk about the various ways you can generate revenue online when you have a website.  I’m just going to do a comparison between eCommerce vs Affiliate Marketing vs Advertising vs Subscription revenue streams and we’ll start with eCommerce.

eCommerce Sales

For those of you who don’t know, it’s where you sell a product on your site and send it to them.  Generally, a physical product but it can be digital and you can drop-ship (have someone else carry the product for you).

Profit margin breakdown using ‘normal’ retail markup for holding stock on your own compared to drop-shipping is 50% to 20-30%.  That is, for every $1 you either get $0.50 or $0.20-30 back.

With digital products of course, if you own the copyright the markup is enormous since your cost of good sold is insignificant (marginal cost that is, not upfront).

Pros:

  • Easier to build a brand, especially if you have products or a product mix that is unique
  • Conversion rates can be significantly better as you are not sending traffic away first – that is you get 1-3% conversion from all your traffic, not just the one’s that travel to the affiliate marketer
  • More control – you can adjust your site to better convert your traffic and have a much better understanding of the needs of that traffic than an external site
  • Lifetime customer value – you are drawing the full lifetime value of each customer especially in a business of repeat purchases.  Unlike affiliate sites where you generally only receive the revenue for a fixed amount of time.

Cons:

  • Inventory can be extremely expensive (requiring tens of thousands of dollars)
  • Building the website is often much more complicated than an affiliate site
  • Developing the brand can be a much longer process
  • A more complicated business model as more ‘moving parts’ from inventory, site updates, design, customer service and more.
  • Generally not a passive income stream as orders must be fulfilled, customer service completed, etc.
  • Ongoing customer service issues compared to affiliate sites (e.g. questions, returns, exchanges, etc.)

Building a site – the cost of using Magento

Over the years, we’ve built multiple e-commerce sites.  We first started on osCommerce and then moved to Magento when it was still pretty early – 1.3 I believe.  Since then, we’ve built over 8 sites on Magento so I thought I’d write about our experience and the costs involved.

The Cheap

Let’s start with the basics – a basic installation of Magento should only cost about $500 with a theme purchased from another company and an installation by the developer.  It’s easy to install the basic system and Magento has a lot of basic, good functionality at that price.

The Basic

So, next up we have what I would consider a basic installation.  A purchased responsive theme, a few minor adjustments to the theme to make it to your liking, a new Search module, social button integrations, Mailchimp integration, Gift card modules and that should be it.  Perhaps add a one page checkout to the system too.

This looks something like Fortress Geek right this moment.  Lots of nice designs and additions, looks professional but isn’t too expensive to set-up and run.

Total cost: $2,000 – $3,000

The Complex

Here, we start looking at a custom theme and design (easily $3 – $5k to start), social button integrations, reward point integration, gift cards, a one page checkout, custom reports, custom product page design and automated upsell / crossell modules.   We’ve also got bestsellers lists, an integrated WordPress blog, multiple payment methods and a shipping module.

That’s what Starlit Citadel is.

We’ve spent over $20,000 easily over the course of a couple of years on this site.  We’ve upgraded, tweaked, upgraded again.  That’s a lot of money, but we think it’s worth it.  These days, we don’t spend much on the site though – it’s just upkeep.