Kunle: A lot can happen over the course of three years, I mean I have a three year old son. My guest on today’s show proves it. He managed to build a dropship auto part ecommerce business from $0 to $8 Million in just three years. He’s going to show, in this week’s episode, how he was able to consistently double revenue year on year. $2 Million, $4 Million, $8 Million. And if you’re thinking about dropshipping for your ecommerce venture, how to start, and how he manages 500,000 SKUs and planning to double the number of SKUs in the store. It is packed with great info that is sure to inspire you or your ecommerce operations. So listen in and catch you soon.
Welcome to the 2x ecommerce podcast show where we interview founders of fast growing seven and eight figure ecommerce businesses and ecommerce experts. They’ll tell their stories, share how they 2x their businesses and inspire you to take action in your own online retail business, today. And now here he is, the man in the mix, Kunle Campbell.

Kunle: Hello 2xers, welcome to the 2X ecommerce podcast show. It’s been a while. I’m your host, Kunle Campbell and this is the podcast where I interview ecommerce entrepreneurs and online marketing experts who help uncover ecommerce marketing tactics and strategies to help you, my fellow 2xers and listeners, double specific ecommerce metrics in your online stores. If you’re looking to double metrics such as conversions, average order value, repeat customers, traffic, and ultimately sales, you are in the right place.
On today’s show I have with me Michael Dash. He is the president of CarPartKings.com, a New York based auto part online retail business, they’re an 8-figure business. Michael, together with his partner David Gitman, are co-founders of Cooper Square Ventures (CSV). CSV has actually been the Launchpad of several successful ecommerce busineses, CarPartKings being one of them, and Plumburs.com, StrictlyPursonal.com and ChannelReply, which is an SaaS, Software As A Service venture. I’ll be talking today about CarPartKings with Michael. Without further ado, I’d like to welcome Michael Dash to the show. Welcome to the show Michael, thank you for being here.
Michael: Thanks for having me.
Kunle: Could you take a minute or two to tell us about yourself and your background?
Michael: Sure. I grew up in New York, I went to school in the south, in New Orleans. I came back to New York to work, I started out in the real estate world and finance and construction, and then I ventured into StartupWorld, where I was involved in a healthcare start-up, that’s where I met my partner David. We worked there for a couple of years, exited and believed that we worked well together, so we started Cooper Square Ventures shortly thereafter and decided to go into the ecommerce world.
Kunle: Ok. Let’s take a few steps back into real estates. What kind of real estate were you into? Was it residential, commercial at the time?
Michael: It was a little of both, it was finance and development deals.
Kunle: How long did you do it?
Michael: I did it about 5 years which then lead me to become a project manager within construction companies. I worked at a very large developer construction company and I was the project manager in 109+ buildings throughout Manhattan and Brooklyn.
Kunle: Interesting, for five years. When you moved into the hospitals, into the medical space, could you break down what you guys did in terms of your venture into that?
Michael: We were providing an infotainment system into hospitals, healthcare centres and nursing home facilities. So similar to something that you would see in Virgin Airlines, Video On Demand, Skype, Games, you name it, and you would be able to interact on a touchscreen monitor in a hospital or a nursing home or wherever you had somebody in a bed for an extended period of time.
Kunle: In a hospital bed to keep you active?
Michael: Exactly. Very captive audience.
Kunle: And you could Skype and watch movies. And then you exited that business and you started CarPartKings.com.
Michael: Yeah. We were looking into a couple of different ventures at the time and came across a good opportunity in auto parts. We had a great supplier who was willing to work with us and we decided it was a good field with a higher barrier to entry, it wasn’t like any other ecommerce company we had looked into. So we went after it.
Kunle: Ok. Let’s step back a bit. How many ecommerce industries or verticals did you identify or look into before you decided it was car parts?
Michael: There was a number, there was a couple. Nothing specific, it was more we were looking into industries and car parts came about naturally as I knew somebody in the industry already. So I went to talk to them about it and they gave us some advice, told us how it works as far as distribution and shipment and that’s when we decided it would definitely be a good field to go into for us.
Kunle: This was in 200…?
Michael: 2010.
Kunle: Did you start selling actively in 2010 or 2011?
Michael: 2011.
Kunle: Ok. So why car parts? They’re quite complex.
Michael: That’s one of the best reasons right there. It’s a very high barrier of entry. You don’t have the connections to get the data and to the technology shops that handle that data, you aren’t going to be able to start or last in the industry. So it’s not like every single person that can go out there and start a clothing company or an electronics company or any other ecommerce company that’s out there and have a million different competitors. There’s only a very few select number of people that can go out there and sell auto parts and do it well.
Kunle: How many brands does CarPartKings actually cater for?
Michael: CarPartKings has about 250 different manufacturers that we deal with now and the list is growing on a monthly basis. We carry over 500,000 SKUs. Each one of those SKUs fits about 50 different vehicles on average, so there’s about 2.5 Billion rows of fitment to deal with on a daily basis.
Kunle: So one product would work with 50 different models of cars?
Michael: Exactly. So when you’re buying a car part online, it’s not like you can just go online and by a brake pad, let’s say. That brake pad has to fit your 2010 BMW 328 with a 3.2L engine and rear wheel drive.
Kunle: How do you even start to deconstruct that? You probably have to start from the cars themselves?
Michael: The data is obviously the most important part. We have to make sure that we give good data. We get data from a number of different sources. Direct from manufacturers, from distributors, from coop societies and we’re handling data from a lot of different places that touch a lot of different people. We bring all that data into a centrally located ETL process which calls that data in, transforms it, and loads it into our database.
Kunle: I guess when those data sources were being built, they were not for the internet at all. They were probably for sales, managing sales…
Michael: Most of the data actually comes out of paper catalogues. So it was scanned in and it wasn’t even in any type of format, let alone Excel, so an industry standard was created called ACES and PIES which help standardise that auto parts fitment industry since it was so complex and it’s slowly being adopted now. So we take data and we transform it so that it’s readable and usable online.
Kunle: That is quite interesting. So that’s how you go about simplifying experience. So you get it raw, you get it as raw as possible and then you refine it and customise it to your standard, the standard on your website.
Michael: Exactly.
Kunle: How many SKUs did you start off with?
Michael: We started out with about 50,000 SKUs, which is still a lot in most industry standards, not in auto parts. But it was a small enough data set that we were able to massage it, learn the data, what the pinpoints are, where we can drive, what was needed on a transactional basis for a customer, what was needed to load that data into marketplaces such as Ebay and Amazon, which we sell on, and we took it from there and as we got more comfortable with data, we started to add more SKUs.
Kunle: Do you stock 500,000 SKUs?
Michael: We personally don’t stock anything. We are a dropship company, that’s our model. We use different distributors to dropship the products for us. Our inventory is in about 70 different warehouses across the country.
Kunle: You’re the second fast growth ecommerce business in the States, as a dropship business essentially. So I guess you’re building a lot of value with the customer experience and post-purchase?
Michael: The customer retention, and as you said post-purchase and pre-purchase, you want to massage your customer. We use an inbound marketing strategy, it’s little different to direct marketing. We try to pull the customer in during that research process. It’s very difficult to compete with the likes of Amazon during the point of sale. So somebody knows what they want, they’re going to type in the SKU and that item, they’re usually going to find Amazon cheapest or another store cheapest, purchase that product and that’s it.
Kunle: So how do you beat Amazon?
Michael: An inbound marketing strategy is how you beat Amazon. You try to grab that customer before the purchase, during the research phase. Most people that are looking at specifically auto parts are researching if they don’t know directly like a mechanic what they need, they’re researching a part, their car, what it does in the car, there’s a million different data points where we can hit somebody before that actual purchase. We built an auto Wiki on our site which tells you thousands of pages of information describing what a part is, how it’s installed, how you can build certain aspects of the car, now you can update your car. Every type of item you can think of around a vehicle, whether it’s part related, vehicle related, manufacturer related, we put into our Wiki hoping that, along with our blog, it will attract a customer to a certain page. Once the customer has hit that page, you offer them a coupon for their email address so that you can kind of massage them through the funnel of their purchase process, hoping that they’ll stay with you down the line.
Kunle: Two things I’ve picked up: it’s all about their email address. You want to get their email ethically because you’ve given value to them initially, from research. The second question I wanted to ask was in regards to images. Are your guides quite visual?
Michael: Yes, images are very important for us. We have close to 10TB worth of images that we host, so images are very very important to us as well as video. We have a lot of video out there on different parts, how they’re installed, what they look like in a car, how you can use different parts in different situations, what’s the difference between a regular rotor and a slider rotor, there’s just so much data that’s involved in each purchase that we try to give the customer as much of it as they can possibly get.
Kunle: I haven’t actually checked your Youube channel.
Michael: Most of the videos aren’t actually housed on our YouTube channel, but other people’s YouTube channels, we sponsor a lot of different mechanics out there and what they do. We’ll provide then with free parts, with support, with anything that we can give them to build out their own YouTube channels and create a customer base. We’re not mechanics, we’re parts guys, so we provide those mechanics who have the knowledge with the products they need to make informational videos around themselves.
Kunle: So you co-brand, you sponsor content out there, but you don’t necessarily want to get your hands dirty, literally speaking.
Michael: Actually we probably will. We’ve had a couple of informational videos, which is very difficult to scale that since we have so many different parts and types of vehicles. Scaling that becomes a pretty daunting task. We start off, just like we started off selling, using other people’s abilities to sell products for us.
Kunle: Ok. Let’s go back to dropshipping. A lot of pundits in ecommerce have said dropshipping isn’t the most efficient of business models. Amazon started out as a dropshipping model, Zappos tried it, and then they soon realised that they had to switch over to owning their stock. Do you see it as a viable model long term?
Michael: Absolutely. The last thing that I want to do is hold stock. It is more profitable to hold stock and sell your own items, but there’s a lot that comes with that. Purchasing a warehouse, purchasing parts, managing those parts, knowing what to move. 500,000 SKUs will cost me near to $50 Million+, so the return on that investment would take a lot longer to pay off, plus I have to hire a whole new staff just to manage that stock. Not only warehouse, you’re then talking about purchasing department, buying department, inventory department. In our point of view, you leave it to the people who do it best. This is their industry, this is what they’ve done for the past 60-70 years and there’s no reason to try to step into that.
Kunle: Do you ever worry that your suppliers or your distributors could come in, hire some whizz kid to develop an ecommerce operation that will rival your business?
Michael: I don’t. They don’t want to be in the online business. It’s much more profitable for them to be in a distribution business than a direct sales business. They see the headache that we have to go through to acquire and sell a customer, and for them, to acquire and sell someone like me who sells parts is a lot easier. So if they have 30-40 people like me who are selling parts and then distributing, it’s a lot easier for them to build the distribution model than a direct sales model online. Not only that, if they decided to go into a direct sales model online, guys like me who buy from them, will no longer buy from them, so it’s a catch 22 for them. DO they want to stay in the distribution game or do they want to venture into the online sales game?
Kunle: It makes perfect sense. So for our listeners thinking about going into dropshipping, how did you manage to convince distributors to work with you, if they’re going to ship for you, it’s a hassle.
Michael: That’s their industry, so if they don’t want to ship for you, there’s got to be a pretty good reason. Now if you’re unproven or you don’t have the wherewith to do it online, obviously it’s sales on your part, selling the distributor on why you would be a good client for them, why you’re going to sell parts for them. It always starts slow. You’re not going to get the best pricing upfront. You’re not going to get the best shipping time and delivery upfront. You have to spend some money on your end, building, if they have an API system or an email system for handling those parts, you have to invest in what makes their system work. But eventually, over time, as you start to build your sales with that particular distribution company, you can go back to them and say “alright, I’m starting to do more business with you, I need better prices, and I’ll do more business. Now I’m doing X a month, I need even better prices.” It’s a game, you keep going back to them showing them the value that you provide and essentially, getting better pricing from them, which is the end game. The better the pricing, the better your margins.
Kunle: It’s a leverage, It’s like trench warfare, you gain some ground and then you move on. It makes a lot of sense. What minimum viable team size would a start-up need to support a dropship model initially?
Michael: It really depends on the technical wherewith of the owner. Myself, I’m not amazingly technically gifted, that’s why I partnered with David. He has been involved with technology and is probably one of the smartest technologists I’ve ever seen. So, for him, it made perfect sense to partner up. I could do the business end of things, handle initially the customer service myself and let him worry about the technology, so at the start it was the two of us, and then as sales grew, and business grew, we brought more people on board. We started with a secondary developer, then we brought on another customer service person and a catalogue person and then another catalogue person, and another developer, and another customer service person, and you slowly add roles as you go.
Kunle: How did you team look like in 2012?
Michael: In 2012, it’s hard to even think back. In 20012, I believe we had 4 to 5 people on staff full time.
Kunle: Were they all developers?
Michael: No, we had customer service, which is extremely important, you need to make your customers happy, that’s probably the most important aspect of the business. We did have developers, and we had a catalogue person full time, someone who’s sole job is to load and manage the catalogue, so the catalogue is essentially your baby, if it’s not fully kept up and attended to, it’s going to get out of control and you’re going to have a world of work.
Kunle: That’s heavy lifting with 500,000 SKUs.
Michael: Yeah, we didn’t start with that many.
Kunle: What does the team look like now?
Michael: Now we have about four time full time equivalents, as we like to call them. We’re spread out across 8 countries and 7 different time zones.
Kunle: Ok. How does that work?
Michael: Good question. It’s a lot to manage, but we find that the best talent isn’t always on your doorstep. The world is flat these days and if you can find the best employee in the Ukraine, then that’s where you should work with that employee. We have a great task management system. We use Jira, which is extremely good at organising and building out tasks for employees and staff. We also tied that into a time management tracking system so we can track everybody’s time spend on each project. So you know what’s being done at all times, chats are in there, their workflow, screenshots, everything, similar to Odesk, but customised for us.
Kunle: Ok, that makes sense. So it’s auto installed on their desk?
Michael: Yes. Both Jira and TimeDoctor are cloud apps. We just run them in the background while you’re working.
Kunle: I’ll share these resources in the show notes. So how many staff do you have?
Michael: 14.
Kunle: In 8 timezones?
Michael: Correct.
Kunle: So some are in Europe, some are in Asia, I guess? And some are in the States with you.
Michael: Yes, correct.
Kunle: And how many people work in your New York office?
Michael: Four.
Kunle: Ok, that makes sense. And of the 14, how many customer service people are there?
Michael: Three.
Kunle: Ok. Let’s move into traffic and customer acquisition. I’m wondering what your number one customer acquisition channel is?
Michael: Organic.
Kunle: I can see it from here in SimilarWeb. It says that 41% of your traffic is from search.
Michael: it’s actually 60%.
Kunle: 60? Wow. Do you run paid advertising?
Michael: We do. Paid accounts for about 30%
Kunle: Ok. Which did you do first? Did you start off with organic?
Michael: Yes, we were always organic first. We only started paid, I think, in 2013, so we were always organic. We definitely believe in organic search as being a viable model. That doesn’t mean that it’s cheaper than paid. The misconception is that organic is free. There’s nothing in this world that’s free and it couldn’t be truer for Google. If you want organic traffic, you have to build out an extremely indexable website that Google likes. You have to be putting content out all the time that’s rich, fresh and that people want to use and read. You have to constantly be updating and working on your social. There’s so many elements to organic search that it could essentially end up costing more than pay-per-click, so you have to see which makes the most sense.
Kunle: Is it not a volatile channel because of the updates, the Pandas? Especially with the size of your website CarPartKings, especially Panda. How did you pass through those major algorithm changes?
Michael: We had to make adjustments. You definitely get hit with the likes of a Panda. There’s definitely tools out there that you can use to make sure that you’re not completely shut down by it. If your traffic decreases 20-30%, you’ve got to get what’s being decreased, what they’re hitting or why they’re doing it, and you make adjustments. People that say that organic is not a viable model because of the next algorithmic change by Google that’s going to sink your business, I think that’s a bit extreme. I don’t think they’re just sinking your business with one algorithm change. Maybe I’m wrong, but we’ve definitely got dinged by the changes, but we’ve never been in such bad shape that we couldn’t recover from.
Kunle: That’s quite interesting. What about your number two acquisition channel? Where do you see the second most important customer acquisition channel?
Michael: Paid search is definitely a close second for us. It’s a lot to manage. We actually have an agency that manages it for us. Maybe one day we’ll bring it in-house, but just due to the large data set that we have and the amount of variables in each search term, we use a speciality agency that focuses in the auto part world.
Kunle: And what’s your daily spend on AdWords?
Michael: We run at about $1000 on a high day, generally it’s in that range.
Kunle: Are there any peak periods? In normal consumer ecommerce, you’d find November and December are the busiest period.
Michael: Our busiest season by far is summertime. Two reasons. One, that’s when people can get outside and work on their cars and people love to work on their cars when it’s nice out, they bring it out of the garage, they put it in the driveway, they work on their cars, they go racing, they race their cars in the summer, and also heat destroys cars. The cold actually does well for cars, it doesn’t damage them too bad, but heat fries electronical components, damages mufflers, puts damage in tyres. So the hotter it is, the more parts we sell.
Kunle: Good stuff. You’re in the office and everybody’s out in the sunshine. Is all your SEO managed in-house or do you also outsource that to an agency or part of it to an agent?
Michael: No, it’s all in-house, but we outsource a lot of it to freelancers. We manage it all internally. I built a good team around us, content writers, bloggers, videographers, a social team. It’s sided off, but it’s all managed overall in-house.
Kunle: I guess the heart of your SEO strategy boils down to content. What about SKUs? That’s a big problem. When you get it directly from manufacturers and they share the same data to ten other car manufacturers, how do you manage 500,000 SKUs and get them unique?
Michael: It’s a good question. When that data is shared, it generally is missing a lot of different attributes, features, images, what have you, so we’ll load it in as they give it and then we’ll come and take a second pass at it, see what we can add ourselves. We’ll take a third pass and see what the internet had. Obviously the internet is a valuable resource and you could find a lot of valuable information out there. So we’ll take a third pass at it. We’ll put it up on the site, let it run through and if customers have recommendations, we’ll tweak and change SKUs as we go along. We have what we like to call a SKU management system which makes it very easy for anybody within the company to manage SKUs. So if you see something wrong, you can go in, enter the SKU, change the picture on the fly, different attributes, descriptions, whatever it is that needs adjusting, then we can get back up and refresh by the next day.
Kunle: It sounds like a lot of work. So you add value to the core data set.
Michael: Exactly. Now, there are companies out there that would licence you the data. They have the data and they’ll licence it to you. It’s a good way to start, but you have to realise that you’re no different to anybody else licencing that data. Everybody has the same data set. Google’s looking at everybody that’s the same and kind of keeping them at the same level within the search. The second that you have unique or different data, you’re going to move up in the search, so it’s important.
Kunle: That’s along with domain authority to Google, which could separate you from the rest. It’s quite interesting, there’s a lot to talk about. In regards to marketplaces, did you start off with marketplaces?
Michael: Yes, we did. We started off on Ebay actually. We saw that it was relatively easy to sell parts on Ebay and that’s what we did. We partnered up with somebody who was licencing the data to us just so we could get up and selling so that we’d have some revenue come in to build the rest of the company out. We sold with them for a good few months. Then when we had our own data set, we dumped them and started listing direct on Ebay, then we started selling on Amazon, which was next. We moved from Amazon to our own website and we started selling with some other channels such as Sears, NewEgg, Rakuten, Mercado Libre, whatever marketplace we could get our parts on that have a fitment tool.
Kunle: I’ve got two question in regards to marketplaces. One, how does Amazon compare to Ebay in 2015 for a business like yours?
Michael: For a business like mine in auto parts, it’s relatively even. They started out a lot slower, so Ebay was much bigger for us initially. Amazon has come on very strong lately and our sales are growing at a rapid pace on Amazon, so we’re about equal with Amazon and Ebay sales.
Kunle: Second question has got to do with the other marketplaces. Which do you think is going to be the fastest growing one to watch?
Michael: For us, those other marketplaces don’t really do much for us now. If you’re in electronics, I would say NewEgg is probably the best for you or Rakuten, and to go overseas, Mercado Libre is growing rapidly. It really depends on the product that you’re selling, that’s where the other marketplaces really come in to play. Jet, the new marketplace coming out, we can’t really sell on Jet because they don’t have a fitment tool, so you won’t be able to know that a part fits your vehicle. Maybe in time they will, but for now, it would be nice to go onto that marketplace in one of the other industries.
Kunle: Interesting. I’m just going to ask you a question about social media before we talk about retention and loyalty. What impact has social media made on the brand thus far?
Michael: Thus far, it hasn’t actually been as effective, as engaging, as big and as much of a necessity as people make it out to be. Maybe it’s just our industry. People buying auto parts tend to not talk about it a lot online and share that information. It’s not like clothing where people are online talking and taking pictures and engaged in clothing or electronics. Auto parts is a very specific industry with a specific demographic. 50+ year old men aren’t on Facebook talking about the brake order they just installed.
Kunle: Last winter, I was speaking with the owner of a company called DriftWorks in Birmingham, actually, which is about an hour from here, I live in Oxford. His business is similar to yours, he sells auto parts, but it’s to enthusiasts to drift cars. So they share their videos, they’re very passionate about what they do. But I guess in a consumer end, like yours, I just buy the parts, fix it. To me, it’s more like a headache, really, if my car breaks down, and why would I want to share that experience?
Michael: There is a segment that does tend to share a little bit more online, which is performance. There are performance parts which we sell. People upgrade certain things, think of the Fast and the Furious. People that tend to make really big brakes or a giant exhaust system or giant headers on the cars, something like that. That tends to be shared a little bit, but even not so much as anything else. So for us, we have a decent user base, we try to engage them, but it hasn’t been the next big thing that everybody claims it is.
Kunle: What about mobile? Are people buying from mobile devices?
Michael: Mobile is a very big thing for us. We’ve seen an increase year over year very rapidly from mobile adoption. I can pop in to my analytics here and tell you what our mobile versus regular is. In the past 6 months, mobile has accounted for close to 35% of our traffic now, and growing.
Kunle: Is it research oriented or is it transactional?
Michael: Both. People are using their phones much more often these days. Whether it’s a phone or a tablet, what we did is a full mobile redesign, we launched about 6 months ago, and for mobile, first we have a completely different experience on your phone, on your tablet, than on the website depending on screen size. And we’ve seen a huge boost in conversion rate to it.
Kunle: Ok. I’m going to ask you one question about customer retention and that’s because you’re a dropship business. What advice would you give to dropshippers, or people looking to go into dropshiping? Perhaps their existing business is trying to expand their offering through dropshipping or there are start-ups looking to get into a particular industry or vertical with dropshipping in mind. What fundamentals, from a customer service standpoint, should they be aware of for success?
Michael: I don’t see a dropshipper’s any different than somebody who’s going to be selling to the customer, they don’t know you’re dropshipping. Most dropshippers white-label your boxes, so it has your label on it and whatever you want to put in the box, you want to put in something about your company, a magnet, a coupon for their next purchase, you want tape on the box that’s specific to you. Whatever it is, it looks like it’s coming from you these days, that’s how most dropshippers do it. So for them, I don’t see a big difference in customer retention from an inventory and ship model, than a dropship model. I see them as the same. What we do, is we put something about us in each and every box that goes out, whether it’s a magnet, a sticker, a coupon offering for their next purchase, a note that asks them to please call us if there’s anything wrong and we’ll make it right, to keep reviews there, and we always obviously try to capture emails so they you can continue to market to them throughout their lifetime, obviously lifetime value of a customer is extremely important to us.
Kunle: How do you measure lifetime value? Over 12 months or more?
Michael: We do it over a longer period of time, because, generally, the average order time is longer than most industries because we have three different customer segments. Knowing your customer segments is obviously very important. For us, we have three which is the “Do-It-Yourselfers” one, the perdon whose car breaks down and knows nothing about parts, but they know the mechanic will tell them, so they buy and ship directly to the mechanic. The third is the mechanic themselves. Mechanics and professionals buy from us direct. The LTV is measured differently for each customer. Our mechanic’s LTV is going to be measured a lot differently than a one-time buyer for a broken part. So we have different LTVs for different types of customer.
Kunle: The frequency of purchase would be up the roof for mechanics, I would assume?
Michael: Yes. They can purchase up to 10 times a month, or more. Whereas a one-time purchaser could purchase one time a year.
Kunle: So it might get complicated in the backend when you’re trying to actually segment and group them.
Michael: Everything’s complicated. But yes, it was a definite challenge for us to group and differentiate those customers.
Kunle: Really good stuff. And what about average order value? Has it grown over the years?
Michael: No, for us, it’s actually shrunk over the years. As we’ve grown, we’ve had to become more competitive on price, so what we tend to do is pull a lot more items into each order. We offer free shipping on each item, so we pull that out of our average order value when we calculate, so if someone has 4-5 parts in an order, it’s a lot more valuable for us. We tend to compete heavily on pricing and retention and not worry so heavily on order value. We want them to keep coming back as customers.
Kunle: Do you make use of any repricing software to adjust prices?
Michael: Yes, we reprice everywhere on our website, on the marketplaces, Ebay and Amazon, so we’re heavily involved in our pricing.
Kunle: What about personalisation? Is there any module, personalisation of engine built-in to the experience? Will I see different recommendations compared to…?
Michael: We’re looking into it, it’s just very difficult due to fitment. We can offer you a subset of a product or a universal part along with the product that you’re purchasing, but it’s very difficult to offer on a module, just a normal plugin, one that we’re not developing ourselves, a recommendation system that’s going to work with our fitment system. It’s something we’re looking into, we currently don’t do a lot of it on the website.
Kunle: Ok, interesting. Let’s move into fulfilment. Are you into international, cross-border ecommerce?
Michael: We sell to every country that allows us to sell into. We actually just ran a report over the last 90 days, we shipped to more than 140 different countries. So as long as we’re able to ship parts in, we will ship parts in.
Kunle: Did you start out the business shipping abroad?
Michael: No, we started out in the states and expanded internationally. A great way to expand internationally without too much of a headache if you’re in the States is using Ebay’s Global Shipping Programme. So if you’re selling within Ebay, you can offer your products to 100+ countries and only ship to a warehouse located in Kentucky. They take the headache of international shipping out of it. You ship to Kentucky and they handle it from Kentucky to wherever it’s going.
Kunle: There must be something for Ebay UK or Ebay EU.
Michael: I’m not too sure, but I’m sure that something out there exists.
Kunle: Very interesting. So what’s the share of domestic to international?
Michael: International accounts for 15% of our business right now, but it’s a very large growing sector for us.
Kunle: Where are your top countries?
Michael: Believe it or not, Kazakhstan is a huge one for us. It came out of nowhere. We would have never thought in a million years.
Kunle: What kind of car parts do they buy in Kazakhstan?
Michael: I’ve got to ask Borat, I’m not too sure. They buy a ton of parts from us. Everything from brake parts to suspensions, exhausts, everything. Russia is really big for us. Australia, very big for us. There are reasons that we would’ve never thought or planned ahead of time would have been successful for us. Naturally what happens in a business is you launch something expecting one thing and you get a totally different result. You can do your research and find out that Japan is one of our most heavily imported countries for auto parts and not sell into Japan, but sell tons of parts into Egypt. It’s kind of whatever the market dictates.
Kunle: You don’t know until you try.
Michael: Exactly.
Kunle: How many suppliers do you manage?
Michael: We manage four main distributors. We did grow to more than that, where we had close to 15, and it wasn’t worth the headache, to save a couple of hours here. Let’s say one distributor has 100,000 SKUs and another distributor has 100,000 SKUs, some of those SKUs will cross over, some won’t. Let’s say 15% of the SKUs will cross over. So what we did was build an algorithm to say who is the closest to the customer and who was the cheapest, and we’d send the order to that distributor. We found that it wasn’t worth it at the end, there was too much headache involved managing all those distributors, so we cut it down to four of our best distributors, and we give all the business to those four. We found that we get better service that way, as we’re a bigger customer with those distributors and essentially get better pricing as well because you’re doing more business with them.
Kunle: Absolutely, you keep it simple, and then you invest in the relationships and build your purchase power with them. What was turnover in 2014?
Michael: Revenue in 2014 was close to about $7 Million, and in 2015, we’re on pace for $10+ Million.
Kunle: So you have $8 Million generated by 14 staff? Amazing. So the revenue per head is very substantial, $607,000. Your gross markings are like…?
Michael: Close to 30%
Kunle: 30%, not bad for dropship. Let’s fast forward to your first year. What was revenue like in your first year of operation?
Michael: That’s a good question. I think we were close to $250,000 – $300,000 in sales. We didn’t do very much sales in our first year. Most of it was building.
Kunle: We’re in 2014 now, so in two years, you grew the business from a quarter of a million dollars to $8 Million essentially?
Michael: Yes.
Kunle: What did revenue look like in 2013?
Michael: In 2011, like I said, we were about $250,000, 2012 we did $2.4 Million, 2013 we did about $4.5 Million, and growing from there.
Kunle: Fantastic, that’s impressive growth. You’ve pretty much doubled the business every year since 2012. That’s impressive. Given how rapidly you’ve grown CarPartKings, how do you envisage growth to be over the next three years? The same pace?
Michael: The same pace or more rapid. I’d like to see us grow 10x over the next three years.
Kunle: That’s ambitious. Where is the growth coming from?
Michael: Adding more SKUs, higher conversions to the site, and we’re trying to build more revenue through the site direct, especially with international sales.
Kunle: This is pretty extensive. I was checking out your parent company site, and I came across Plumburs. There’s another business. Is there a reason you’re going into the plumbing industry?
Michael: What we found was, spending so much time and building such a robust ecommerce system, there was nothing that prevented us from going into other industries. We built a process that can take in any SKU, you want to call it SKUX, and transform it, load it into our system and sell it everywhere and anywhere quickly. So the only thing that was holding us back was relationships. If we had a great relationship with the dropshipper on any industry, we could sell in that industry, and so we went out and started talking to some people and that’s how we got into plumbing. We had a great opportunity to go into the plumbing industry and get some great prices, a good partner, dropshipper, that’s why we made the foray.
Kunle: Impressive. Ok, I’m going to round off by asking you what one tip would you give to our listeners looking to see the growth you have seen over the last four years?
Michael: It’s tough to say growth wise. I’s easier to answer a question of what tip would you have for someone maybe entering the industry or that wants to be able to manage it a bit easier. I think that’s: don’t go after such a large SKU count. Keep it simple, go after 10,000 SKUs, find out what the best sellers are, master those SKUs and then grow from there. Don’t take on too much in the beginning. If you have a vendor that says “I have 100,000 SKUs for you”, that may be great, but it’s going to delay you a great deal into getting online and selling. Not only that, it’s going to be very hard to report on what is selling. There’s always the 80/20 rule. You’re only going to sell about 20% max of the catalogue that you have online. So there’s no reason to go after such a heavy inventory set from day one.
Kunle: Great advice. Keep it simple and then scale out. Thank you so much for being part of the show, coming here, taking your time and the listeners will be appreciative. I will put all our notes in the show notes in this episode. Thank you again Mike. Everybody, Mike from CarPartKings.com
Michael: I appreciate it, thanks for having me on.
Kunle: Cheers, bye.