I work in ecommerce as a fractional brand owner, consultant, and have a software company around data collection designed for the Shopify + Klaviyo ecosystem. We work with brands ranging from a few hundred thousand a year to $80+ million. In that past I ran Marketing for a consumer hardware company that started on Kickstarter and was later acquired for around $50 million.
So I’ve seen ecommerce from all sides up close and personal including retail relationships and large partnerships with massive brands.
I’ve now made the transition to Data First ecommerce marketing without exception.
Here’s my advice for anyone looking to start a store or scale an existing store.
This is a condensed version of my exact playbook that is available in my courses.
Part 1: The reality of where we’re at within the ecommerce landscape
The average DTC ecommerce company spends more on advertising than the cost of the goods being sold.
The markup of between 4-10x is what they rely on to make up for the difference.
As a consumer, you’re actually paying for them to advertise.
We’re all collectively paying Facebook and Google for product discovery, which in turn makes everything more expensive.
How warped is that?
Adding to the irony, most brands would be thrilled with 2.5-3x if they could sell in bulk which is what they would get from a wholesale account.
So if you can come up with a way to move volume, brands would love you.
(sell through is a separate issue in retail and wholesale)
The costs associated with digital advertising are so high these days that it prevents growth for a lot of brands.
For small brands this is causing cashflow crunches that shouldn’t be there.
(add in rising costs of goods, shipping, and inflation…things are tough right now)
This is especially true in (Consumer Packaged Goods) CPG where a 12 pack of carbonated flavored water has to sell for $48.
This isn’t sustainable.
We have an unhealthy obsession with digital advertising.
While everyone is focusing on attribution and being told that email is the answer for retention, everyone is largely ignoring the shift continuing to take place in digital advertising and the increases in the costs associated.
Email addresses aren’t free and few even track the email signup to conversion rate.
Even well optimized ads often have CACs that are higher than the first order AOV product costs.
The fact that a CAC to LTV payback period exists is all you need to know about how inefficiently things are set up.
You’re betting that enough people return in order to cover the initial amount of money that you spent to get someone to shop the first time.
The math just doesn’t check out anymore for a lot of brands, our addiction to digital media has allowed for monopolies to dictate prices, profit billions a week and essentially forces people into taking outside investment.
Maybe you’ll go viral?
Our current systems highlight a trend that doesn’t benefit the little guy in most situations and in fact has been systematically set up to prevent people from growing.
Bottom line, building a following is time consuming and expensive.
Part 2: Competition
Often not discussed are changes in the competitive landscape, TikTok, Shein, Temu, Amazon direct from Manufacturers, and large companies dominating the retail landscape.
What no one tells you about DTC.
You need to understand the current state of the market and how and why we got to this place.
2012 – This was the modern age of DTC with cheap Facebook ads and the ability to “cut out the middleman”
This was the age where Dollar Shave Club and other brands had massive growth and were able to start cutting into the profits of legacy brands that enjoyed massive distribution through retail relationships.
Corporations didn’t care, until they did, they started to make their own companies like those offerings, but they were too late to the party, when you’re too late to the party you pull out your checkbook and you purchase these companies.
And large corporations did, quite a few of them.
Fast forward 10 years later, none of them panned out financially the way they would have liked.
Something else happened around the same time, very cheap money from VCs chasing the exits they were seeing, the problem is that all these DTC companies got confused and thought they could be real businesses and compete with the masses.
This only works if you can leverage cheap acquisition.
But here’s where things get super interesting, most DTC companies that raised money found out they needed retail and to own their own shops in order to bolster their presence, turns out retail wasn’t dead.
But now they are trying to compete with the same costs they were trying to avoid. They IPO’d then their shares tanked 90%.
So what happened?
A few things…
People began streaming TV instead of watching, so ad dollars started to migrate to other platforms.
Corporations realized it’s cheaper to outspend your competitors on advertising to drive up their acquisition costs and bolster their own brands than it is to acquire a brand and have to keep running it.
Amazon has become the default in terms of getting anything you need at a good price delivered to your door.
Pandemic happens, sales boom, globalization takes hold, everyone wants to run a brand, competition increases, shipping continues to go up.
Death by a thousand cuts.
I won’t even get into Facebook Ads issues and other things because they don’t matter as much as people think they do.
Oftentimes it’s macro changes that impact business more than micro changes, and you have to zoom way out to understand these things.
We have had massive consolidation across most industries in the last 20 years and more are on the way, the ability to compete with large corporations only existed before they were able to change the playbook to force brands to spend more to acquire customers.
This one genius action allows them an invisible hand to control markets.
They don’t need to make a competitive product, they just need to make sure that it’s too expensive for a challenger brand to be able to operate profitably.
They are taking the write-off on the marketing side of things too, marketing used this way becomes both offensive for awareness and defensive to protect market share.
Part 3: What current optimization looks like and the gaps
The average brand for every $1 million in revenue will spend about $300k in ad spend to do so or 30%
The average brand fully optimized will spend around $200k to do so or 20%.
This translates to a 5x blended ROAS.
But it’s one and done.
This figure incorporates return customers into it as it’s a blended average.
When we look at a paid acquisition channel:
A super great ad campaign might do 5x.
Most brands would be thrilled with ROAS of between 2-3x.
But on average across all of them with first touch, it’s likely you’re somewhere around 2x being considered good.
The same brand is chasing at max around an 8% conversion rate on a day without a big sale or an email boost.
They are actually happy with anything over 2%.
The truth is, there’s a massive amount of inefficiency in ecommerce.
But when you take a deeper look, it becomes quite clear why this is the case.
There’s 9 points in the customer journey that can all play a role in conversion for a first purchase.
Often they aren’t aligned.
The audience isn’t known.
The creative doesn’t speak to that audience.
The ads don’t stand out in a feed.
The landing pages are trying to just sell.
Popups don’t offer any real value and show only once.
Offers are the same for all traffic sources.
Product pages lack all the necessary information.
Price is usually inflated or unclear on the value.
Product looks the same as other competitors.
The truth is, most of the time, website owners are just too close to the problem to see the issues.
We’re all very good at creating the company journey, we’re all pretty bad at creating the customer journey.
A lot of this stems from not knowing your audience and not seeking to understand your audience.
Your success starts with attracting a quality audience, one that is looking for a solution and has the budget necessary to purchase from you.
It’s about molding your copy and content to match what they are looking for while providing the value needed for them to feel comfortable making a purchase.
Part 4: The framework we recommend to everyone these days even those starting out
Good rule of thumb – product should have at least 5-6x margin on it.
If product costs $1 – sell it at $5-6
Here’s the exact framework we recommend to brands from sub $5k a month to $6mil+ a month:
- Pick your hero product, offer a reduced price through paid acquisition channels only, hide the url from search or gate the offer by requiring a signup form with data collection to access the link. Cap this at one item per purchase per person, first purchase only.
- Put them in a separate welcome flow, if they leave the page or don’t add something to the cart, they won’t be able to access the offer, some will buy at full price, some won’t, on email number 3 which should be about 15 hours the first email, give them the link to the offer again. If they don’t sign up you can double tap them later, with a smaller offer.
- Collect data during signup connected to revenue, orders, and conversion rate, baseline the conversion funnel, aka subscription to conversion rate.
- You should average at around 15% opt-in rate and at least 20% subscription to conversion rate. This means for every 100 people that click on your ad, you should see 3-4 purchases (3-4% conversion rate from cold traffic). Your CPC should be around $0.50-1.00 which means you’re paying between $50 and $100 for 3-4 purchases which puts your CAC at anywhere between $12 – $33.
- If you’re not hitting these numbers, you have a CRO issue or quality of audience issue. Figure this out through data relationships.
- Use data for repeat and return purchases to understand likely buying periods, generally, the top 25% will purchase again within about 8 days from the first purchase, top 50% will do so in around 16 days, top 75% 30 days, 90% within 60 days, and 99% can take up to 5 months. (these are percentiles, ignore the 90%+)
- Know your numbers on repeat purchases and offer discounts and bundle suggestions relevant to existing purchases accordingly. Don’t go too early, but know your confidence intervals based on the sale number and automate all of this.
- Email campaigns should now be automated and straightforward, product releases, company updates, customer spotlights, and occasional sales (though you really shouldn’t need sales anymore if you have your automation setup proper) this should reduce your emails so people will look forward to them again.
- Stop tracking ads by ROAs, instead pay attention to the cohorts that are driving repeat revenue by signup data patterns and answers they provide to determine trends on quality. Now adjust your entire acquisition strategy to find more people with patterns like those that are regularly converting more than once.
- Become data first, profit and grow.
Sidenote: This framework works on repeat for multiple purchases. If you’re one and done YOU REALLY NEED TO COLLECT DATA AND SCALE to move into retail distribution. Buyers want to see sell-through and knowledge about your ideal customer and what matters to them. They have large email lists, but you need to help them connect the dots.
If you have data, it’s that simple. It’s all offers and timing.
Some of the things to really pay attention to – CAC to 1st purchase AOV – this is pretty much your guiding light on if you have a profitable business.
It’s all about getting the best margins in whatever business you start.
Part 5: The exact popup strategy we use to collect usable data to leverage into strategy
This is the exact framework we use with clients to grow their businesses through data collection.
You can do this with a combination of current tools on the market right now.
(Disclosure: we have a tool that combines all these as our software and provides context relevant to revenue, orders, and conversions but there are alternatives on the market that don’t provide the context.)
(This post isn’t about our product though, we’re not a public app, so use what you’ve got.)
If you’re a small company multiple tools will cost you around $400-$600 a month.
If you’re more than $10 mil revenue multiple tools will cost you $4000+ per month.
The following framework assumes that you’ve realized that you should be using multi-step forms with live data collection to collect intent data during a popup offer beyond just an email or a phone number.
Not sure that these are? Just Google “multi step forms intent data” and click on the top non-sponsored post.
Statistically 50% of people will never open your email and emails aren’t free so at least trade for some valuable intent data from everyone that subscribes.
The below uses popups, some people hate popups, but they work really really well, find the highest intent purchasers and are a treasure trove of data collection prior to a purchase.
Whatever discount you’re providing is made up for by the amount of data you can collect and leverage globally across your entire marketing stack.
It’s not a reduction in revenue but an investment into a higher conversion rate and optimized advertising.
This is a really important mind shift to embrace. Odds are you’re spending so much money on advertising and really not getting any real qualitative value out of it.
Follow this framework:
Strike the right balance between data collection, conversion, and customer experience through popups.
Make them multi-step to collect data related to the customer journey as it matters to the customer. Make sure that you’re tying these data points and combinations to things like revenue, orders, and conversion rates.
Home Page Popup
Clear offer 8-10 seconds after someone arrives
Landing Page Popup
20-30% scroll usually only targeted at your paid traffic
Can split test different offers based on url or utm
Product Page Popup
45-60 seconds after landing page
Depending on how you are sending traffic to this page, you can limit it to people having taken action on your home page or landing page forms e.g. if visitor dismissed Home Page or Landing Page form and not subscribed show Product Page Form, if not then do not show
Thank You Page Embed or Popup (prefer popup from results)
Embedded post purchase survey OR
Post purchase popup with the same questions (this one has a higher response rate)
Stand alone page after someone clicks on a link or a button
Do not ask for an email
Do not just present products at the end, instead send people to a landing page with the product results with context as to why they were selected, offer alternatives at the end
Quiz Follow Up Popup (for after people take quiz)
60% scroll tied to the landing pages with the quiz results
Same offer as before, triggered only if quiz is completed
Reduce the questions to complement questions asked in quiz
By default to get to this page the quiz has to be completed
Yes this could be considered a lot of popups but people will only see one if they subscribe and at max they see 3 only if they hang out on a product page for a really long time.
The double tap on the product page makes the average business an additional 18-20% in revenue through signups and averages up to 40% subscription to conversion rate so it’s super high intent data collection.
When we do data modeling we only use the signup forms, we do not use quiz or post purchase as they are both pre-purchase trend related during the discovery phase and post purchase is too limited to actually show anything more then trend data. Data on the upfront side is more reliable.
Part 4: Why Retention is really secondary acquisition and how to treat it appropriately
If people don’t shop more than once you’re likely going to take a hit to revenue.
Most retention strategies are actually secondary acquisition strategies facilitated by discounts.
Unlock free money from people that converted by automating from the customer journey perspective.
We are a largely discount adjusted society these days, so lean in strategically, knowing your margins.
Understand your cohorts based on intent signals to maximize revenue while balancing repeat purchase offers.
Some people purchase again in as little as 8 days, some take 5 months. Most never purchase again.
As a general rule of thumb focus on the first 45 days for repeat purchase, through content and education post purchase and remove people from offers and sales. If the experience is good and there’s a need they will come back within 45 days. This will maximize your CAC payback and prevent you from losing more margin via discounts.
Day 45-90 position offers to unlock that second purchase for people that didn’t purchase again, go deeper on offers until they buy, pay attention to your unit economics to understand profit v. cac payback.
(Note exact times vary by cohort and data combination, so segment your list appropriately, or find a service that can help you do this, you’d be amazed what the proper data can tell you.)
During this period mix it up with offers that include bundles so you can raise the AOV, usually of the same or similar products they purchased. Also cross sell products other people with similar buying habits made as well to increase your odds of conversion.
This has been the blueprint for years. For most companies if people don’t buy a second time in 45-90 days they never will at a percentage worth paying attention to.
They will wait for big sales periods or new product releases to dive back into the customer pool.
You can tweak based on events and behavior but it’s more effort than it’s worth most of the time.
There is a downside though to running this playbook, when you couple this with normal occasional sales and specials, you really need to have your acquisition down solid.
If you do this cadence, people will be trained to ignore your offers and wait, so you’ll usually have to bribe bigger on the discount ladder.
This will also impact your topline acquisition costs, you’ll get more low quality people trained on discounts.
And you’re going to do a lot of chasing people that won’t come back when you start to not be able to distinguish between people that purchased because they wanted to vs. those that were just waiting for a sale.
I don’t disagree with it, I’ve talked previously about torching lists if you don’t get a sale in the first 90 days and just putting them on slow informational updates and only including them in on large sales and new product launches.
To me this isn’t retention, it’s milking the living shit out of someone that’s taken an action and getting them drunk on discounts to continue purchasing.
It’s successful if your margins can support it, but I’ve seen it being used as a crutch to drive revenue at all costs.
Reminder though, revenue is not profit.
Part 6: Goal of this post and Stats
I’ve tried to simplify this for a reddit post that people can find value in, this is a subset of more than 120,000 words that I’ve written about ecommerce over the last few years.
This approach is data first. As such a lot of agencies and other marketers hate it. Largely because it’s an audit on all ideas and breaks everything down to simple mathematical testing.
You’re running businesses and businesses are math.
The other reason people don’t like this approach is that if you have enough of the right data, you don’t need agencies and you quickly realize that they are largely spending time on the wrong things.
While we were building all the tests around these things for the last few years we looked at ecommerce as a blank slate, no rules.
So we opted to run our playbook on a commoditized good, good margin, but super competitive.
We decided against sales, leveraged 2x use discounts on signup, and have kept our ad creatives and campaigns to a minimum (40 creatives and 40 campaigns or so in 2.5 years, this is not a typo).
This goes against what all common advice is in ecommerce.
Stats on current store we own part of and run all marketing strategy for:
- $12k year before I joined
- $220k first year I joined
- $550k second year
- $2.5 mil estimate this year
Current Performance KPIS:
- $10-$12 First time order CAC
- $30 AOV first order
- 6% conversion rate
- 20% repeat purchase rate
- 3.5x blended ROAS (high growth with a low AOV impacts blended ROAS)
- ~30% net profit
- 40 pieces of creative total for ads
- 40 campaigns total for emails
- 3 key email flows
Part 7: My take on modern ecommerce
Ecommerce brands that stay digital only should grow via two channels max (Facebook, Google) to between $2 million – $8 million a year in revenue and look to sell to Private Equity or Holding Company.
It’s a sprint that with the right approach and funding can be done in less than 4 years with a valuation of between 1.8x – 3x depending on your margins. Without funding it will take slightly longer and you’ll have to forego a salary.
On the low end this nets you out between $3.6 – $24 million for your work.
With a small team of 4 people you can all walk away with an average of between $225,000 per year to as much as $1.5 million a year if perfectly executed with all work done internally.
The trick here is that the value is 100% in the exit for most ecommerce businesses.
During heavy growth the majority of all profits have to be reinvested into inventory and marketing.
There is a trend to pay attention to though, the rise of the influencer and celebrity led brands.
Increasingly, creating a product isn’t the hard part, marketing the product is the hard part. By and large most products are completely commoditized at this point and you’ll have knockoffs popping up in a matter of months if your product is successful. Brands take years to develop.
You’re not Ryan Reynolds, if he’s reading this, even he’ll tell you that, you’re not getting paid millions of dollars for movies and being paid by studios to be front and center promoting yourself across all the airwaves.
The amount of press that allow celebrities to create successful businesses in spaces like booze (Teremana Tequila, Aviation Gin, Dos Hombres Mescal, Skinny Girl Vodka, etc.) which is largely all the same at the end of the day shouldn’t be overlooked.
It’s all marketing today, cost effective marketing and getting your product into hands at the most affordable price with a quality product that people look to purchase more of.
Last bit on this and I can’t stress this part enough.
KPIs are largely outdated in today’s marketing environment.
ROAS – Return on ad spend, shouldn’t be measured in a fixed time frame.
CTR – Click through rate, it’s the quality not the quantity.
CAC – cost to acquire a customer – I actually like this but narrow it cost to acquire a first time customer
AOV – average order value – separate this by first purchase v. returning purchase
At the end of the day, micromanaging an ad account will not provide results, but taking a holistic look at your entire customer journey can provide outsized advantages.
If you can understand the quality of the audience, then you can influence CAC, if you can influence CAC, then you can build sustainable growth models, if you can build sustainable growth models, you can build a profitable business.
If you follow the steps above and you meet the criteria, you’ll know within 90 days if your business can be successful.
A closing note on data, nearly 100% of the people collecting it aren’t collecting the right data, it’s become something people check a box to rather than properly leverage. It’s a complicated topic that isn’t widely spoken about.
In truth there’s a big difference between people that say they are “data-driven” and those that actively understand how to use data to drive efficiency increases.
All that said, for the love of all things, focus on building an audience first, it’s 10 million times easier to succeed if you have an existing audience that is adjacent to your product and industry.