“Lessons Learned” is a series where we ask ecommerce business owners to share their experiences. For this installment, we spoke with Greg Jerum. He is the CEO of TheUncommonDog.com, a year-old web store that sells a variety of dog beds. He also runs Net Return Marketing, an ecommerce marketing company.
Jerum’s business is located in Denver, Colo. Currently, TheUncommonDog.com carries between 4,000 to 5,000 SKUs, and the start-up has grossed approximately $500,000 in its first year of operation. “We’re looking to expand our catalog,” said Jerum. “We’re going to double it just over Christmas.
“We have a pretty aggressive growth plan. We created something called the 10 M project (we call it 10 M because 10 M stands for $10 million). Our goal is to take The Uncommon Dog from a startup to 10 million dollars in sales in three years. So, we have 24 months to go.”
“Our big inspiration behind starting TheUncommonDog.com was we had been in the realm of ecommerce consulting for about seven years, and wanted to take all the knowledge we learned from that and apply it to a business of our own so that we could accelerate our own growth and also put our money where our mouth is, so to speak.
“In my role as an ecommerce marketing consultant (not just ecommerce but that’s our specialization), I’ve really been fortunate to work with a large array of ecommerce businesses, from small businesses to a couple of top 500 Internet retailers. I accrued a lot of knowledge about ecommerce and ecommerce marketing, what works and what doesn’t.
“My business partner and I became really passionate about having our own ecommerce business, taking all the consulting knowledge and bring it into the real world–not that in working with clients is not a real world thing, because of course it is–but it is a whole different thing when you’re running your own business. We’re coming to appreciate the realities of that very much now.”
“Our current cart is called 7Kart . We chose it as our initial cart not knowing as much as we know about carts now. We chose it mainly because the developer is a friend and someone who we’ve worked with on ecommerce projects.
“It’s a hosted solution, software as a service [SaaS], and overall it’s worked fairly well for us. Overall, I’m happy, but we’re definitely looking to change carts in the future because we’re really outgrowing that type of a cart and that model. The main thing that I’ve kind of realized over time is we need more flexibility, and so we’re looking to go into an open source situation; specifically we’re looking at Magento.
“I’m looking to work with a developer, and that’s another thing that I find attractive about moving into the Magento type model. Ideally, we’d like to have one developer that we work with, but also have the flexibility to bring in a specialist if we need to or to bid our project on the open market and with a software solution.”
On the Benefits of Split Testing
“What I want to grow into with the new cart is the ability to do more sophisticated testing with marketing. I’d like to start with a simple test, like testing our ‘Add to Cart’ button. And, before we make a large investment in product videos, which we’re really raring to do, we want to test those on select basis to truly gauge our investment. Are product videos increasing or not increasing our conversion rate? And also test video styles.
“What I would do initially is just do an A/B test to look at how a product sells when there is a product video on the product page, versus not having a video. I’d send 50 percent of the traffic to the page with the video, and 50 percent of the traffic to the page without, and then look at the resulting sales and other levels of engagement for people. Ultimately, I’d probably want to test every element on our site because I’m pretty into testing.”
Order Management and Drop Shipping
“We don’t fulfill most of our orders because we’re in a very heavy drop shipping model. We do have heavy order management needs, but not in the fulfillment area.
“We’ve really made a big effort to have a really deep selection in the product categories that we’re in right now. That is a really important part of our strategy because we’re also very heavily trying to leverage paid advertising. We want to make sure we could really convert the click. So, we have relationships with more than 25 manufacturers and that’s really exploded our order management needs–not so much from a fulfillment standpoint but from an order processing standpoint and order tracking standpoint.
“So, about six months ago, we started using Stone Edge. It worked. It’s gotten us to the next level. We now have a gateway open where we can grow, so we’re happy with it from that standpoint.”
“We only offer free shipping at this time. We [decided] that it would be the easiest way to handle it. We try to price our products so that, wherever possible, we are on a level with our competitors. We build the shipping into the product price. We come up with an estimate of what our average shipping cost is going to be per product. We pick a fairly conservative shipping zone, say a zone six or a zone seven ship, and we have an Excel formula that calculates the shipping cost for us. And then, if there’s any type of extra fees or a manufacturer’s drop ship fee, we just calculate it all into one package price which we can then offer with free shipping, and that’s our published price to the site.
“So when people are checking out, it’s very easy. All they see is free shipping. We don’t try to complicate things with the front-end customer. They just see one price and it’s all free shipping and we do all the calculations at our end and monitor the real shipping cost on our end and that’s part of the backend complication to make sure that we’re not upside down on shipping making it really simple for the customer on the front-end and also try to deliver a really good value at the same time.”
FedEx vs. UPS
“We started off shipping with FedEx because their rates were a lot lower at that time. But, since then, they’ve gone through a rate increase and we’ve started to migrate over to UPS because they’re giving us pretty good discounts and also their features seem a little more customer friendly. We have some pretty deep needs as far as tracking. So we’re starting to lean more towards UPS and do more business with them.”
“We cannot always designate the carrier that we want our drop shippers to use. Some drop shippers have flat rate shipping and they do all on their accounts with their carrier. Some will let you ship on your own account, ship third party, and they even let you choose FedEx or UPS, and everything in between. It’s pretty much a mixed bag.”
“We have one fulltime employee who mainly devotes herself to order processing and customer service. My business partner, Anna Florey, is our operations manager and she will be going into the business fulltime in January.
“As part of the consulting business, I have an employee who does search engine optimization. So we’ve had him as part of our investment in the store. I’m more of a part-time consultant and strategist for the business. And, I personally manage all the paid advertising.”
“We really didn’t have any idea of what to expect for customer service needs because we hadn’t been involved in a customer service business before, and that’s where we had a big surprise. We really underestimated how much customer service we’d be doing and how important that would be to the business.
“Probably 97 percent of our sales just run in a fairly automated way where we don’t have personal contact with the customer outside of friendly, automated confirmation emails. And we really try to make everything very smooth and easy for the customer. But, the other 3 percent of our sales are what takes up probably 80 percent of our customer service time.
“Early on, we had to make a choice. Are we going to kind of ignore this 3 percent? Because you can financially run a business that way and there are companies that do that. But we decided that we want to see that every customer was satisfied. We stretched out as far as we could and really invested the resources in making sure that we are available by phone as much as it is needed, even as a small company.
“So that has been a surprise and definitely a big challenge, but we want to run a business for people. Ideally, we’re going to have a glowing reputation. People won’t be saying mean things about us in forums.”
Search Engine Optimization
“Our main SEO focus at this point is just getting a reasonable amount of leverage from our product catalogs. Our site is search engine friendly in a basic way in that we have lots of pages and lots of products. But, as far as a long-term aggressive SEO program where we really try to go after high rankings on higher volume commercial terms, we’re actually not quite there yet in our business plan. We’ve had other priorities to address first. So, we just have to try to build our site so it’s search engine friendly in a basic way. We’re trying to leverage our product catalog by making sure we have a Google site map and making sure we have our title tags done and just the basic aspects of search engine optimization. Later, we’re hoping to grow a large percentage of our traffic organically from the search engines, but now we really depend more on the paid advertising.”
“We’ve pretty much tried to use everything, but AdWords is our mainstay. That’s been a huge driver for our business. We also advertise on Yahoo! Search Marketing and MSN AdCenter. We also use the shopping engines pretty heavily, including Google product Search and about six shopping engines, including Shopzilla, Shop.com, NexTag, and a few others. We try to cover all the major ones. I experimented with some minor pay-per-click search engines but I didn’t get a result that I was really happy with.
“We have a lot of keywords. Definitely a thousand plus. We’re really into niche marketing with AdWords, developing a really, really detailed keyword list and then pointing those towards specific products to try to really get a strong match. We identify the areas where there’s less competition and you can get clicks more reasonably and really create very specific ad for either products or types of products searches and then connect those to the exact parts and get that optimal match–where someone searching on something and not really seeing a lot of relevant ads but you have that relevant ad so you do really well with Google where you get a low click cost and then also your conversion rate is really good on your site. So we’re building out our pay-per-click account in that way. I would say about 60 percent of our traffic comes from PPC. Probably 10 percent from SEO.”
Social Media and Email Marketing
“This isn’t typically considered part of social media, but our main focus is actually growing and leveraging our email list, which I’ve always been a huge proponent of. [We send emails to] my clients and some networks. That’s our main social thing, but we’re also looking at probably starting some Facebook advertising in 2011. We’re still trying to find the place for social media within the business.
“Our email vendor is MailChimp. I’m really happy with what they offer.”
“Our biggest mistake has been underestimating the time it takes to complete a task. It’s still hard for us to estimate the time it’s going to take to produce projects. We’ll go out to get a set of products and have a certain launch date and still we find that it often balloons by 200 percent or 300 percent. Also, allocating the resources around that so that we can have a business plan that doesn’t get totally torn into shreds after two or three months in this project.”
“For instance, it took us a year to launch, which I know on average it’s not that bad, but we were planning to launch within six months. So it took us double the time to launch our site, which was a huge resource cost. It didn’t submerge us–we were still able to have the resources we needed to get across that starting line and then once we get across it the business started really picking up its own way–but it was pretty close. It could have been a very big mistake. We almost lost our critical momentum.”
“Overall, our business plan is succeeding. We had a good idea that we could succeed because of our experience with clients. We’ve seen how they run their businesses so we felt like we have a leg up, but you still never know how something is going to work online until you actually launch it. I drew up a lot of projections and really looked to leverage our strengths, which is primarily with the paid advertising, and basically it worked. And now we have a viable growing business that takes a lot of effort to make it grow. It’s not a cakewalk, this ecommerce thing, but the business plan is basically working.”
Suggestions to Other Merchants
“The number one thing is to make sure you have a really good business plan and that you get good advice upfront. whether it’s from friends who kind of know what’s ahead of you. Make sure you get sound advice so you can avoid others’ mistakes, and then stick with it. The people who make it for the most part are the people who stick it out. It’s not a flash-in-the-pan business. Ecommerce is really kind of a blue collar business in that it’s built day by day.”