Justin Ligeri from Yagoozon is our first guest in our Amazon Seller Success Series featured for this month of March. Justin started on Amazon with a $50 loan from his Dad late 2010 and by 2013, Inc. Magazine voted his Yagoozon store the number #1 fastest growing company in the retail industry, where he predominantly sells toys, costumes, and kitchenware. At over $38 million in revenue, Justin is our biggest Amazon seller by revenue to come on to the show. In 2015, Justin set up manufacturing firm Kangaroo Manufacturing, in order to adapt with the changing Amazon ecosystem and to control his supply chain for even bigger horizons on Amazon.
In this episode, Justin stresses on how it is important to control your supply chain in order to ensure good margins on Amazon, and he explains why good relationships with suppliers can be crucial to your success, especially when buying closeouts. Justin’s longterm experience with Amazon comes across throughout this episode as he explains various aspect to getting a good read on what it comes down to: the current demand for a product in its context to the supply chain.
This episode has elements of a masterclass on Amazon selling, and is essential listening for anyone wanting to learn about how they might start a store as well as adapt and maintain a positive growth in the Amazon ecosystem for their business well into the far future. Don’t miss it!
Amazon is changing rapidly and the model on Amazon is changing rapidly. And being able to mend with the way the website goes and find how you can truly be profitable on the site is a very, very important part of the process. The things that I did in 2011 to make money made a killing and they wouldn’t make anything right now.
So if you’re able to read those two numbers correctly, you can generate a concept of what the demand is for a specific item.
I always had the entrepreneurial mind-set. I was always able to make money fast, but I never had any money. I blew it playing cards or gambling or whatever, partying. And I always did that and I had millions of times in my life gone from zero to that kind of $30-$40,000 number. So I knew I had a self-destructive pattern. And it was actually at a casino in South Florida one day where I just almost had this out of body experience looking at myself at an ATM trying to just play more poker. And I stop myself and I said, you know, I’m 32 years old and I’m a loser, really. And I just need to stop being destructive. So I made an internal decision to not stop at that ladder point of $30,000 or $40,000, and say, what would happen if I kept going? And then that’s where it was like, oh wow, okay.
I kind of made an internal decision to not stop at that ladder point of $30,000 or $40,000, and say, what would happen if I kept going?
There’s a ton of demand on the website and just being able to understand it is really important.
I’m a seasonal SKU count, so there’s been times where I’ve had not nearly as much as some of these other sellers that buy small amounts of inventory. I’m a deep not wide type of guy. So you know, during Halloween I might be as much as 5,000 to 8000 SKUs whereas now I might be operating just around 1,000 SKUs.
It’s not necessarily a good thing or bad thing that I’m in the Buy Boxes all the time. I mean if I’m in the Buy Box in particular products it might be I’m losing money and I’m dumping inventory. To beat Amazon out of the Buy Box, I’m usually not really making that much money. So for example, sometimes people copy me, and so then I’m willing to take the loss just trying to teach them a lesson, like, ‘Bad boy, don’t copy me anymore.’ So going in the Buy Box just simply means that I’m making the sale, but doesn’t mean I’m making money. It’s just price dependent.
I mean you know we do get angry customers. Amazon has developed a breeding ground for very, very content people that are very high maintenance and think the world should just revolve around them. You know, it’s like they are very entitled. Amazon has created them into this buy it, use it, return it, return the open box. So all we basically do is there’s a feedback policy and sellers are not allowed to leave product reviews on feedback, and they’re not allowed to talk about shipping stuff. So if we didn’t actually get those removed we’d probably have about 99% rating. For years we had 99% feedback and then I actually started putting more energy into getting those removed. So on Amazon, that’s just their policy, they’ll take those off.
Where is there a place to make an awesome product that what’s being offered is really not that great but there’s a lot of search and there’s a lot of demand?
There’s more of a demand, believe it or not, for a generic item that’s not a licenced item, than a licenced item. The number one Halloween costume every year is a child’s police officer – outsells Spiderman and Darth Vader 4 to 1. So these items are popular and they add up. And these licences are great but it’s not needed to make money. Just seeing where there’s demand and where people are searching for something, there’s plenty business there. And when you graduate that course, then you can go and get a licence or something.
If you search for any product that my manufacturing company makes, it’s usually number one on Amazon, if it needs to be. If I don’t feel it needs to be, if I feel it’s too general of a keyword, it may be number one on five keywords and it might be number three on a couple keywords. But I’m pretty much getting all the generic traffic for the more generic items I make. And it starts making an awesome product, better than the last guy. So if I’m making a hat, I see, ‘What are the issues with it? Oh, it creases. Oh, the ribbon falls off,’ whatever. I’m going to make it better, right. The very first step to building up an item on Amazon would be to make a great item.
The second thing that’s most important is to make a killer detail page. Most people make crappy detail pages on Amazon. They just want to get it up there quick, sometimes it’s just lowercase letters, poor punctuation in the product bullet points, and then they try to put 8 trillion keywords in the title as if Amazon would respect the title anymore. Making a killer detail page that’s attractive is important.
Now, when you do when you shop and when you check out on Amazon, Amazon is always showing other items by the same seller. So that’s going to help your new products appear in front of other people, you know, like ‘people who bought this bought that.’ I think that increases your sales across the board a little bit, but you don’t necessarily need that and you can work to make a great selling product without that.
I’m currently working on shrinking my SKUs to 250. But I’m shrinking it to get rid of the least profitable, and then I’m going to expand, maybe someday I’ll have 100,000 SKUs. So the idea is I’m getting rid of what’s not working and I want to control the situation. And the only real way to have complete control over supply is if you own the brand. Other way you can have complete control is you’re best friends with the manufacturer and he’s best friends with the CEO and he’s telling you the truth when he tells you, ‘Listen buddy, this is everything.’ You know, because you don’t to deal with that other seller copying you or deal with the price going down. So for example, with Target and Walmart, in their model of business these stores have a profit built in. They’ve controlled their model and put profit into the cost of their product. But here, Amazon doesn’t let you do that, you can’t control the price because you just don’t know who’s got it, you don’t know who is getting it. So basically Amazon sellers can’t have profit built into their model unless they’re willing to keep things on their shelves forever. I’m putting all my personal millions that I’ve made into this manufacturing company. And the reason is because it is a guaranteed outcome.
You can’t be self-fulfilled and be extremely successful on this site, it’s not even really possible. You have to understand why Amazon’s attractive to people. It’s attractive because they can go on the website, they can get it for free shipping and they can press one button once to buy it. Prime is what’s attractive about Amazon. And your ranks are going to go crazy better. You will never see a top 100 item stay in the top 100 that’s not Prime.
I use a very basic repricer called Appeagle. And the reason is I can’t let my repricer think for me. I have to do my own thinking. I can’t tell the repricer to do it because if the repricer does it and I say I’m willing to go as low as $10 and as high as $30, well Amazon can put their product as out of stock at $10, even though they’re not going to sell it for $10, to trick my repricer to go down to $10. Then I’m now selling 3,000 units for $20 less a piece which is $60,000. Just because I’m letting my repricer think. So I have to be active. And I’ve actually created my own software recently that’s lets me know when I’m not in the Buy Box, so I don’t have to tell the repricer as much information.
I make great products that people love, I mean they just absolutely love it. And I also think that being on top for what the consumer is a searching for is what’s most important. And that’s why I think I come up first under everything I make, because it’s so exactly what the consumer is looking for.
Why I think I come up first under everything I make is it’s so exactly what the consumer is looking for.
I am in the process of dis-creating Yagoozon is an entity. I’m really trying to create one company that really matters to me, and that’s Kangaroo. I remember with one of my favourite toys, when I noticed that there was a lot of demand for play food, the first thing I wanted to do was give them better than what was already there. So the best toy food on the market I saw offered up to 105 pieces. So I said I’m going to stay at the same price point but give 120 pieces. And I sold out my entire PO in two weeks in Christmas. So I love that Amazon aspect of the business. But yeah, why not sell it to Walmart, Target, and everybody else too, right.
I love that revenue. I sold out my entire PO in two weeks in Christmas. Of course I love that Amazon aspect of the business.
My future plans are to create the largest manufacturing company in the world, streamline manufacturing to be the next Apple, maybe create the first flying car, maybe the first robot that thinks and breathes, I don’t know, but it’s going to be much bigger than hustling product on Amazon.
I like to see what they can give. I give a lot so when I meet people a lot of times they’re all talking about what they want. So I look at people that talk about what they can give and look for those types of people that can breathe the company and its mission.
I mean we have a software called Fishbowl. We also use a basic QuickBooks, so we’re able to manage our inventory, see what’s on the water, see what’s coming, look at our receivables and our inventory at the same time, just like a regular company. At some point I think we’re going to develop something much more sophisticated once we’re a little bit bigger.
If you’re just looking to 2X and 3X on Amazon sales you only have to pay attention to demand. But if they want to make a ton of money, don’t get into buying product until you know intimately that product. Know it, know its story, know where it is. Know how much is out there. First you want to know your demand but after that, know all that other detail so you can determine 100% profit, you know you. If you meet a woman, you found out she killed her ex-husband, you might consider not going on a second date with her. And people don’t ask those questions, ‘Did you kill your ex-husband?’ No, they just go buy it, you know, and find out. Because a lot of products killed their ex-husband, let me tell you that. And you’re going to find that out once they land at Amazon’s fulfilment centre.
A lot of products killed their ex-husband, let me tell you that. And you’re going to find that out once they land at Amazon’s fulfilment centre.
It’s not a business book but my greatest book ever was Illusions by Richard Bach. It just shows that everything is really the mind and you can mend the physical universe with a change in thought pattern.
(02:00) Introducing Justin Ligeri
(07:45) Getting a Read on Amazon
(16:38) Tactical Approach to Amazon
(32:36) New Directions: Kangaroo Manufacturing
(59:35) Parting Advice
Kunle: I’d like to welcome to the show Justin Ligeri. Welcome to the show, Justin.
Justin: Thank you, Kunle.
Kunle: Fantastic. Could you take a minute or two to introduce yourself and let our listeners know better, just get to know about you a bit.
Justin: Sure. My name is Justin Ligeri and I own and operate two companies here in Arizona: Yagoozon Inc. and Kangaroo Manufacturing and my story is on the Internet. But I got to a point in life where I didn’t have anything going for me, didn’t have any money and I started Yagoozon with a $50 loan from my father. And at that time Amazon was just going through a lot of changes and their new FBA program which started a couple years ago was just starting to get attention and I got in just at the right time. And you know, basically began selling on Amazon things that I found at local garage sales and flea markets. And I’m a little slow start, I mean I had $40 that I took from the $50 my father lent me and I only did $200 on Amazon.com in the the two-week period. But I learned everything I needed to know about Amazon over the next three months and that’s how my corporations exist today. That was the beginning stages.
Kunle: Okay. Let’s backtrack to some dates here. So you had $50 in your pocket, it’s a loan from your Dad. And so about what time was this? What year?
Justin: This was, yeah this was 2010 and it was in early November.
Kunle: Okay. And then three months on, so the winter of 2010 and 2011 you learnt Amazon quite rapidly.
Justin: Correct. And I had done my own businesses. I had tried. I had a website for the October previously. And in that previous month my father had loaned me over $10,000 which at that time I couldn’t pay him back. On the website only did 20 grand all of October and had more debt, had no cash at the end of it. And it was more of a ‘can’t beat them, join them’ mentality. Amazon was obviously the first at every search engine and just had a couple hundred dollars’ worth of stuff left over and along with that I needed to find inventory so I went to just… we didn’t have any vendor accounts or anything at the time so I basically started in the garage sale, Salvation Army route. So the way November worked was was all garage sales, that’s it. And then I found… and just to bring you up until January 2011, I had found when I got enough money together, because my first Amazon profit was $200, my second was $500 and my third was $1500, when I got enough money together, I went and bought the leftover books at an old bookstore in Virginia, actually found it on Craigslist. And there were thousands and thousands of new books and at that time I didn’t even have the budget for a scanner. [laughs] I remember typing in the UPC codes on 10 million books individually and what happened was one of the things that I found in the bookstore was a set of greeting cards that a Colorado company made. So I actually called the Colorado company, and this must’ve been in either December or January, probably December of that year, pretending I was a bookstore. I’d never bought a vendor before so I didn’t even know, would they sell to me? I don’t even know. So I said, ‘Yeah, I’m a bookstore and we saw your cards and they’re wonderful and we sold them out and our customers want more. And they opened an account with me and I bought from them. And I bought from them so much over a couple weeks that they actually gave me my first line of credit and I didn’t even know what that was at the time and that’s kind of how it started and I started to find other vendors.
Kunle: Okay. So just to clarify, Yagoozon is a toy company, you retail only toys on Amazon or have you diversified across the board?
Justin: I am in other categories. Just to give you the overview, yeah, we’re mainly in a toy category and we do a lot of toys but we’re the largest Internet retailer of Halloween costumes in the world, in the Halloween related stuff. We’re also pretty heavy in kitchen. And I have no preference, I’m in a lot of makeup and beauty, I mean as long as something fits a working model I don’t have any categories I won’t be in.
Kunle: Okay, okay, okay. So in the spring of say 2011, when you’d realise that three months in, Amazon is actually a potential channel for running your business, did you seek any finance to pump into to Amazon or?
Justin: No, I wasn’t able to, at that point I wasn’t able to raise any capital. In fact, the best that I was able to do, as I remember, in June I think I borrowed about $2,000 for a week, so like $2,200 or something from an old friend. And then later in that year in like October, I might’ve borrowed $5,000 or something and then paid back like six or something stupid, like an initial…from another friend but I didn’t know anybody I could borrow from at that time. So it was all basically reinvesting the profits, you know. Once or twice, like on a Friday when I was being paid on Monday, my dad would lend me a few hundred dollars and I would give it back to him by Monday so I could buy printer ink or something.
Kunle: So it was just hand to mouth, you know, it was just hand-to-hand combat really and you poured everything back. So what your stock turnover like? And how did you know what products will sell? Because some sellers listening have products or inventory that’s not been sold for four months and they’re wondering how do you not make that mistake in the first place?
Justin: Absolutely, yes that’s a great question. In fact, I wanted to say that the answer in 2011 is a different answer than 2016. Amazon is changing rapidly and the model on Amazon is changing rapidly. And being able to mend with the way the website goes and find how you can truly be profitable on the site is a very, very important part of the process. The things that I did in 2011 to make money made a killing and they wouldn’t make anything right now. However, that does not change the original thesis point of the question which is demand, right. So as far as making money, it is a completely different topic than generating revenue and selling through the product, right. So if the seller’s not holding to, ‘I have to make money on this, but I just want to get rid of this product,’ the best way to make sure they never buy anything that they can’t sell is to buy for the demand. And it’s pretty easy, I mean I wish it was like some rocket science secret but everybody listening I’m sure knows that Amazon lists the reviews and the sales right at the bottom of every page. So if you’re able to read those two numbers correctly, you can generate a concept of what the demand is for a specific item. That’s never going to tell you if that item’s profitable, it’s never going to give you any supply information, but it will answer the demand question. And you don’t ever buy anything on Amazon without demand unless you’re creating it yourself and you’ve some exclusive contract with a vendor.
Kunle: So do you have any hard and fast rules for, say, the seller rank. Obviously reviews are reviews you know, if you see hundreds of reviews then you know there’s traction there. But what about the seller rank? Do you use both metrics or would you just go by one?
Justin: I mean I think the sales rank and the reviews together answer the question. I mean, because if you just have the reviews, they could have happened years ago when something was hot, like they’re always going to stay. If you just have the sales rank, it could have been a rush, it could have been a Shark Tank episode that aired last night and then that sales rank is going to go down. It could be an Easter product after Easter which is just still looking at the rank. I have Halloween products that rank 50,000 now because they’re still coming down from being in the top hundred during Halloween. So you might say, ‘Oh 50,000, it’s not so bad. I can sell a few a week.’ But it’s not really it’s not a true 50,000 rank. So it’s a combination of using common sense and saying okay, is this seasonal? Did this just air on ABC last night? And by seeing the reviews along with it, so I’ll give you an example, if I see an item that’s a top 100 product with no reviews or two reviews, I’m going to question if that’s just some new thing that just took off, was on As Seen On TV. But if I see a product that’s a 75 in toys and games for example, and has 450 reviews, I know that’s a safe bet. I know there’s a ton of demand for that item, right. So because of that, I know I’ll move, if it was just me alone, 50,000+ pieces 100,000+ pieces, right. I know there’s other sellers and there’s Amazon, profit’s a whole different question but at least I understand that there’s never going to be an issue selling the item, right.
Kunle: Okay, okay. And what’s your criteria per category? Would you say the top 1000, is that what you go by, from sales rank standpoint?
Justin: No. I mean now it’s different. I mean I think back then, if I’m going back a couple years, my criteria was as long as I met with supply the demand. So before I had my new model, which I’ll tell you later is 100% different, I don’t believe in this model anymore but the old model was very simply ‘if it’s 1000 rank I’m going to buy this many.’ All right, it doesn’t mean I can’t buy a 35,000 rank, it’s just that it’s less stable, right 35,000 could be 75,000 tomorrow, I’m going to buy less. So if I’m just buying for 90 days, I may buy a few thousand of that 1000 rank but I may only buy a hundred of that 35,000 rank or 40,000 rank, right.
Kunle: Okay. So Yagoozon, between 2011 when you started and 2014, grew by close to 17,000%.
Justin: Well, that’s what Inc. said, but they were only going through 2012, right. And they, unfortunately, they only start you with your first hundred grand, so they won’t start with $40. If they started with $40, I grew like 30 trillion percent, but you know what I mean.
Kunle: [laughs] I know; I do get you. So you hit $22 million in less than four years, right, in three years, pretty much.
Justin: I did… I’ll just give you the quick numbers. It was like four and a half my first year at 2011, it was 18 my second year in 2012, my third year was 21 – 22 like you just said, 2014 I did 38, right, and 2015 I’m a whole new model and I did roughly the same between two companies but it’s a completely, I’m going in a completely new direction. Not a revenue increasing direction but a pure profit direction, so I’m on a completely different plan.
Kunle: We’ll talk about it. We’ll definitely talk about it, but before we talk about revenue I’ve been meaning to ask you this question. How did you… it’s not got to do with business, it’s just got to do with mind-set… how did you switch from a consumer mind-set, which is pretty much getting the job, going for your job you know, getting your salary and spending, to a producer mind-set which was more like this entrepreneurial mind-set where I need to to make it happen.
Justin: Yeah, I don’t know that I switched. I mean I think what happened was, there was a switch but it wasn’t from consumer to entrepreneurial mind-set. This switch was from failing entrepreneur not following the principles of the universe, to successful entrepreneur following the principles of the universe. I was never able to hold a job past age 20 years old, I mean I had 100 jobs between 16 and 20 and I was let go from everyone. I remember as a kid you know, them calling temporary labour agencies saying, ‘We weren’t looking for a CEO, just someone to screw caps on a bottle.’ So I always had the entrepreneurial mind-set, just out of place you know.
Kunle: That makes a lot of sense, that makes a lot of sense. So the ‘aha’ moment really was those testing periods over the winter of 2010 and 2011, I suppose.
Justin: Yeah, I did have enough moment with my own personal life. I guess what happened with this was I was always able to make money fast, you know, but I never had any money. And earlier that year I had sold fireworks out of the trunk of my car and I had done $150,000 in a few weeks in sales out of the trunk of my car and a little storage facility in Massachusetts and Rhode Island, right. Because they were just legalizing certain fireworks in New England that year and I made about 40 grand in two weeks. At that time that seemed like a real lot of money to me but then I blew it playing cards or gambling or whatever, partying. And I always did that and I had millions of times in my life gone from zero to that kind of $30-$40,000 number. So many times but then at that point, it was like that was the point where I was going to do something really crazy and destructive. So I knew I had a self-destructive pattern. And it was actually at a casino in South Florida one day where I just almost had this out of body experience looking at myself at an ATM trying to just play more poker. And I stop myself and I said, you know, I’m 32 years old and I’m, you know the best way to say it is a loser, really. I mean, at 32 years old I don’t have my own place, I live at my Dad’s, I owe him rent. I don’t have any money. I have no one else I can borrow from and I just need to stop being destructive. So I kind of made an internal decision to not stop at that ladder point of $30,000 or $40,000, and say, what would happen if I kept going? If I took the same model that I have of being a hustler and going for it, but I didn’t then destroy myself when I got to the first step, you know. And then that’s where it was like, oh wow, okay.
Kunle: And how far was this from winter of 2011?
Justin: Well, the winter of 2011 is the year after that point. So I started in 2010 and that was the moment.
Kunle: 2010, sorry, yeah, yeah. Okay, that’s interesting, I just wanted to clarify that before we moved on to the actual tactics of Amazon. So let’s move in to talk about selling on Amazon, and moving inventory on Amazon. For me, or from what I’ve gathered with all the Amazon entrepreneurs that’ve come on the show, it’s all about speed. You get products in the warehouse and there has got to be that demand, and that takes them out of the warehouse and then you replenish. What are your key components for efficiently moving products quickly in Amazon?
Justin: Well I have a different belief than everybody else, but I’m always many steps ahead, you know. So I mean I just saw some of the biggest sellers on Amazon at a tradeshow, not me personally but my people at my company that are selling our product. And they’re all complaining, some of them mega-sellers. And there’s just like, you know, they don’t know what to do anymore because times are changing right now, so if we’re going to talk about Amazon as of today, a lot has changed. So over the last three to four years, vendors and manufacturers of product have become increasingly more interested in trying to tackle what they consider to be a problem in their business model, which is Amazon, right. Why is Amazon you know… [line dropped]
Kunle: Hello?
[restored line]
Kunle: So over the last three years and three to four years you said vendors have been complaining?
Justin: Yeah, no I was just saying that over the last three or four years, vendors have been trying to get in on and figure this whole thing out. They have issues with, you know they want to control their brand, they want to control the price, you know. They might sell to one seller, another seller complains because another seller dropped the price and they’re trying to get a handle on it. They’re starting maps to doing exclusive deals, they’re saying no more Amazon sellers, they are selling just Amazon, you know, trying to sell it themselves. They’re all reacting differently to something that they can’t control or contain, right. And so it’s changing the marketplace. And in the beginning, 2011 you go to a show and, ‘I sell on Amazon.’ I’m like, well that’s interesting model! You sell on Amazon, you know, it’s like the bookstore.’ ‘Oh, yeah, they have other stuff too.’ ‘Oh yeah, I do that, I actually bought something off Amazon.’ Now everybody in the world had a Prime account, everybody clicks 1-Click from their phone and some people get an hour later, you know. I don’t know if it’s drone or a helicopter but they’re getting it, you know, and so it’s a different world. Amazon is now, is the source on the entire Internet. It used to be 1 in 10 products are sold on Amazon, now it’s like 1 in 2, it’s ridiculous. You know, it is the Internet for retail, it’s 10 times bigger search engine than Google for products. So now that everything is changing, everybody’s trying to figure out how they can control the uncontrollable beast, right. So the model of selling on Amazon and making Amazon profitable has entirely changed from when I started, til now.
Kunle: Okay. And so what has it changed to? Well, to rephrase my question, how do you adapt to these changes as a seller? How have you adapted…
Justin: Well you just have to. I started a new company, I’m doing something completely differently. I hardly buy products from vendors anymore whatsoever, you know. I mean before there were less sellers, there were not a lot of people that knew about FBA selling, so you find a product you know, there’s demand for the product and Amazon doesn’t sell that product, right, so you don’t want to sell stuff they sell. So then happens is, is okay, you know you’re selling that product, you’re making money. Maybe somebody else shows up and it takes you a little bit longer sell up. You both kind of stay at the same price. And there you are, you have all your SKUs and if a SKU gets dogged at some point, then you know at some point you’ll leave that SKU alone, you know. But then that happens more and more that a SKU gets dogged. And then it’s almost every one of your SKUs and then it’s like, oh wait a second, you know what I mean. So now you’re trying to stay ahead of that curve, right. Because something that happened once in a while is now happening all the time. And it used to be you have, you know seven wins and three losses, but the wins are bigger than the losses and the percentage is higher so you make money. Now it’s so you have nine losses and one win and it’s like, umm, what do I do? So everything is changing. And Amazon also is copying too and looking at what a seller is successful with and picking up every line in the world and their purchasers are going out saying, ‘Oh you don’t need third-party sellers, you just need us. We’re better for you.’ And the vendors go, ‘Oh, thank God, big Amazon came along and fixed it all for us. They’re just going to buy for us so we’ll just cut off all the sellers.’ And then there’s no loyalty or no good vendor relationships anymore so what happens is, you know, your model is changing. So it’s not like a normal company at does zero dollars and then goes to 10 million and the next year goes from 10 to 50 and then from 50 to 100. Every year you’re starting back at zero, just with a little bit of inventory so you’re a little bit above zero, to re-create those SKUs again. That’s if you’re me, you know what I mean, you’re re-creating new things that’ll work this year.
Kunle: Okay, okay. So it sounds to me like you’re transitioning from a merchandiser of other brands to owning your own brands.
Justin: Yeah, I mean that’s a part of it. It really comes down to one thing. I mean, there was a product that’s great in 2013 and I make a fortune on and then in 2014 I don’t touch because now it’s back in supply. It comes back to one thing. The only way, I believe, that a person can make money on Amazon is to own the supply of a product and understand the demand of a product. Very simple. If I believe that the world will buy 10,000 of these on Amazon and I know there’s only 10,000 out there and I can get them all, then I can determine that I will make a profit on that item. I can control the price of the item, you know. Now if there’s only 5,000 out there and the demand’s 10,000 well, that’s even a better situation because now I know that going up on the price isn’t going to affect that demand. If it was 10 and 10, it may just take me a little bit longer to complete that cycle. But if it’s 5 to 10, now I know I can go maybe even double my prices at one point, right.
Kunle: Yeah. It begs a question, how do you figure out a 5 to 10?
Justin: Well you just have to understand demand. You have to really understand how you view those pages and sales legs. And it’s only within a… it’s not like a concrete thing. It’s within a time. Like I’ll give you an example. If I guess that 10,000 pieces will sell for Christmas and I’m wrong and it was only 8,000, well it’s not like I’m in a bad situation because I’ll probably sell those in January or February. And if I believe it’s 10,000 and it’s 13,000 well that’s not really that bad either because I just raise my price up and make more money on what I have and I sell out early. So neither of them are losing propositions, I mean you can’t be perfect. But you can be near perfect by understanding what the demand is. So that’s really the first job of an Amazon person who’s not going to have their own brand, that’s going to buy it from vendors, is making sure that there is no question whatsoever in their understanding of demand on the website.
Kunle: Okay. So the intuition you… is the demand, understanding demand, based on intuition and experience? You know, just gut feeling and experience?
Justin: I mean, yes, I think those are important things. I mean intuition and feeling and… I have one customer that she always asks the universe and she gets an answer in her body. I mean you can do that but the other thing is you can also just look at the detail page, you know. I mean, Amazon’s going to tell you how much demand is on a simple product. I mean, I just know that that top 100 is just insane demand. That demand on that top 100 is more than most people that are in this business can even afford to buy if that’s the only thing they did. And then that demand in that top 1,000 is still just unbelievable. And that demand in that top 20,000 is really a nice turnover, you know, if you’re not sharing with a lot of people. So there’s a ton of demand on the website and just being able to understand it is really important.
Kunle: Okay, so that understanding. Are there any tools that help you make decisions on demand and and then product selection?
Justin: I mean, it’s just the page, that’s it. I mean there’s no special tool other than looking at, you know I mean you can look at things like CamelCamelCamel. I disagree because it’s not a relevant thing of what happened last year, what’s going to happen this year. I think you’d look at the current detail page and if you want to be patient, look at it in two weeks and see if anything happened. I remember once when I first started I used to put my price in my merchant SKU. And I accidentally put the price I bought it for as the price for the customer. And it was a remote control helicopter and the rank went down from 5,000 to 900 and I sold out of the helicopter in a day. Now if I were an Amazon seller looking at that page for the first time, I might think the demand around 900 rank, not a 5,000 and I might over-buy it not realizing that somebody just sold out at cost, right, driving that product down. So that’s why if you’re new the selling on Amazon, you might want to look at a product page and then come back in a week or two and see if you have the same feeling. Just yesterday a guy tried to sell me $150,000 worth of these Rubbermaid vacuums and they’re going for 250 bucks. And I said, okay well, I’ll look at it and I’ll call you back in a few days. Today that same product is going for $165, you know. So now I wrote him a letter and I’m like, you know what, it’s not as exciting as it was on Monday. And he’s like, ‘Oh I told you,’ you know he’s trying to sell me, ‘I sold only 500 of them out there on Amazon.’ I was like, yeah, that’s what you say but you know I mean I’ll look at it in three more days and tell you what I think, you know. And so you know, that’s my best recommendation to a newbie would be to not just act instantly on your answer to the demand but come back you know and look at it. You can see things that have been there forever, you know there’s things that are in the top 100 that have been in the top 100 for four or five years, now that’s true demand, you know.
Kunle: Okay. So how many SKUs do you currently manage at the moment on Amazon?
Justin: I’m trying to reduce my SKUs but during holiday… see, I mean I’m a seasonal SKU count so you know I mean there’s been times where I’ve had not nearly as much as some of these other sellers that buy small amounts of inventory. I’m a deep not wide type of guy. So you know, during Halloween and stuff I might be as much as 5,000 to 8000 SKUs whereas now I might just be operating just around 1,000 SKUs, right. So now I’m in this restructuring period. My goal is to reduce my SKU count to virtually 250, I mean literally. I’m not trying to expand my SKU count, I’m trying to reduce my SKU count to absolute money, insane money-makers that have 100% guaranteed profit at insane profits through a model that I’ve decided to start at the beginning of 2014, and that was to start my own company manufacturing my own products. I was so sick of… I can only say yes to those great deals that happen when they come down, I get antsy because I only get so many calls a year that are just gold, so I go for some silver and then some bronze and then some, just heavy metals, you know. [laughs] It’s to the point where, and then you get those losses mixed in with your business, so I’m totally redoing my entire model for the future on Amazon, for the direction that Amazon is going.
Kunle: Okay, we’re going to talk about your new company shortly but prior to that, prior to our interview actually, I was on your Amazon store, it was over the holidays and, wow, all the products I came across you owned the Buy Box. And in many instances you beat Amazon to the Buy Box. How do you do that? How do you also maintain 100% seller rating? It’s just 100%. Given the volume of sales coming through your store?
Justin: Okay well, that’s a great question. Okay so there’s two questions there. As far as the Buy Box goes, I mean it may be, it’s not necessarily a good thing or bad thing that I’m in the Buy Boxes all the time. I mean if I’m in the Buy Box all the time in particular products it might be I’m losing money and I’m dumping inventory, you know what I mean. To beat Amazon, when I’m beating Amazon out of the Buy Box I’m probably not really making that much money usually. I mean there are times I am. But I have a motto, I have to sell out of everything, you know. I have to move that stuff. So if I had bought a product not being aware that there’s five of the people that copied me, I mean those guys copied me, I’m willing to take the loss just trying to teach them a lesson, like bad boy, don’t copy me anymore, you know. Some really big sellers too are using my storefront as a way to get into new industries now. I mean they’re literally copying across the board. Like there’s this huge seller and I noticed, he’s got like, he’s been on since the beginning 10 years longer and he does like, millions of feedbacks and he’s basically, he started to copy my Halloween and then copy like one SKU in electronics and SKU… like I mean it’s literally like hand selected copying my SKUs, right. So going in the Buy Box just simply means that I’m making the sale, but doesn’t mean I’m making money. That’s very easy, I mean that’s just price dependent. You can beat any seller… and that changes, by the way. Four years ago if you beat a seller by five cents you were never getting the Buy Box over them. Nowadays you beat a seller by a penny you get way more Buy Box rotation than then. So Amazon’s changing their algorithms constantly, right. So that’s only, that’s basically a price issue, so if you want to Buy Box you just got to be less than the other guy, it’s that simple. Unless that other guy is not an FBA seller, then you have a lot of leeway there, you know.
Kunle: Right, right. And what about the seller rating? The 100%, given the volume?
Justin: Well, I mean you know we do get angry customers. Amazon has developed a breeding ground for very, very content people that are very high maintenance and think the world should just revolve around them. I’ve had customer service calls where somebody bought 18 little novelties for a dollar and all 17 of those little novelties worked really good in one of them only worked for four hours, and they were wondering what we can do for them. And I remember my customer service manager said once and he told his associate, that said, ‘Do you not think you got a good value for a dollar?’ You know, it’s like they are very entitled. Amazon has created them into this buy it, use it, return it, return the open box. Once, I didn’t get something from Amazon on time and I called up just trying to track it and they offered me a refund on my whole order. And I said, ‘No, no, no. I’m sure it’ll show up, just maybe you refund the overnight shipping.’ And there were like, ‘No, no, no, here’s your money back.’ You know what I mean, like instantly don’t care because it belongs to another seller, right.
Kunle: Right.
Justin: So they’ve created this entitlement philosophy so it’s very hard to…so all we basically do is there’s a feedback policy and sellers are not allowed to leave product reviews on feedback, and they’re not allowed to talk about shipping stuff. So if we didn’t actually get those removed we’d probably have about 99%. For years we had 99% feedback and then I actually started putting more energy into getting those removed, the ones that talked about shipping and the ones that talked about not liking the product. So on Amazon, that’s just their policy, they’ll take those off.
Kunle: Okay, okay, that makes a lot of sense. Okay, so two sides of the business, one’s the merchandising, I suppose you have accounts with loads of manufacturers. And the other is your new company where you’re manufacturing. Could you, this is a double-barrel question as usual, but could you give listeners an idea of what your typical margins are on the buy sides, on the merchandising side? And take us through the inception of this new company?
Justin: Okay well, my margins on the side where I make my own product are just insane. I mean they are… I have business reports where a PO cost me $7000 and the sales are like $94,000. I mean it’s ridiculously insane, it’s ridiculous. The margins with the manufacturers, unless I’m getting a closeout that I am aware that I truly have it all because I trust the vendor and there are a couple good ones like that, really aren’t so good. It’s really a shot in the dark. I got very lucky once, you know this Christmas, I bought the rest of the new Star Wars light sabre when the movie came out, it was like 20,000 pieces. Made a killing on it, made hundreds of hundreds of thousands of dollars on that SKU because I was just like the last guy standing. But a lot of times when I’m buying from those vendors you know, I’m not really getting them all or I’m not getting all the information or there’s not enough demand to warrant me buying many so there’s way more product than there is demand by the manufacturer, and their margins are negative margins, I’m buying it for $10 and selling it for $5 you know. So that’s why I’ve moved into wanting to manufacture, because there’s not enough offers in the world, right, every year that can create the revenue, profitable revenue, that I want. But through manufacturing I have a one-year plan to be clearing $1 million a week in profit on Amazon. And that’s because now there’s no limit, I don’t have to wait for Dave to call me and say he’s got a new closeout or John to say, ‘Hey, you interested? There’s only 1,000 left and we’re not making this SKU anymore.’ Now I just say, what does the world need? Where is there a space on Amazon? Where is there a place to make an awesome product that what’s being offered is really not that great but there’s a lot of search and there’s a lot of demand, you know?
Kunle: Um hmm. So I could see it really working well in like generic, say, home and kitchen items. But how do you replicate that in toys? So you said you had a fantastic deal with the light sabres for Star Wars. If you’re going to manufacture a toy for Star Wars, you’d need licensing from Disney.
Justin: Yeah, yeah.
Kunle: So are you going into licensing space or?
Justin: I mean we are approaching Disney on one licence but you know I understand that that’s not really…like I’ll give you an example, okay so, the largest costume manufacturer in the world is Rubie’s Costume Company. My company is called Kangaroo Manufacturing. Rubie’s Costume Company has almost 60,000 SKUs. They are so big, it’s not even funny, I mean they’re a $500 million company, right. And during Halloween, my little company at the time only had 40-something SKUs, had more items in the top 100 of Amazon than Rubie’s Costume Company. My simple little beret hat and top hat was outselling Darth Vader and Luke Skywalker, you know. So there’s more of a demand, believe it or not, for a generic item that’s not a licenced item, than a licenced item. The number one Halloween costume every year is a child’s police officer – outsells Spiderman and Darth Vader 4 to 1.
Kunle: Really? Really? Wow.
Justin: Yeah, absolutely. So these items are popular and they add up. And these licences are great but it’s not needed to make money. Just seeing where there’s demand and where people are searching for something, you can then make, there’s plenty, plenty business there and hundreds and hundreds of millions and billions of dollars. And when you graduate that course, then you can go and get a licence or something, you know.
Kunle: Okay so here’s a challenge. You manufacture goods, you put them up on Amazon. They have no, zero, sales history. How do you build from ground up again?
Justin: Well, it’s funny that you say that because if you search for any product that my manufacturing company makes, it’s usually number one on Amazon, if it needs to be. If I don’t feel it needs to be, if I feel it’s too general of a keyword, it may be number one on five keywords and it might be number three on a couple keywords. But I’m pretty much getting all the generic traffic for the more generic items I make. And it starts you know with the easiest thing in the entire world. It’s like if I was going to tell you how to make, my grandmother is Italian and she makes this really, really great, great, great Italian meals. I moved to Arizona so I haven’t eaten anything she’s made in a while but when she makes a tomato sauce there’s like 7,000 steps literally, like it’s a three-day process. I mean once her eggplant was like a 36-hour ordeal, you know and there’s so many steps. So when you’re preparing a meal there’s all these steps, the very first thing might be she throws olive oil in the pan, right. The very first thing I do before anything is I make an awesome product, better than the last guy. So if I’m making a hat, I see what are the issues with it? Oh, it creases. Oh, the ribbon falls off, whatever. I’m going to make it better, right, I’m going to protect it. Like I make all my hats come in a bag. I’m the only manufacturer that factory-seals hats. Everybody else they come loose, right so when you when you open the product, you touch it with your hand if your hands aren’t washed, immediately there’s a stain, you know, where Amazon doing it, right. So I think stage one, if I were going to teach you how to make this pizza, the very first thing which would be kneading out the dough, would be make a great item. And I think the second thing that’s most important is make a killer detail page. Most people make crappy detail pages on Amazon, right. They just put it up, they put the minimal they need to do, they do the minimum they need to do and under the description they put two or three words. They just want to get it up there quick, sometimes it’s just lowercase letters, poor punctuation in the product bullet points. You know, they try to put 8 trillion keywords in the title as if Amazon respect the title anymore, why would anyone ever create your algorithm that way, you think they want 5-page titles? You know, I don’t read War and Peace when I go to Amazon, that’s just stupid. So making a killer detail page that’s attractive is important. I’ve never purchased a product with a 40-page title but there’s so many people that are learning this on these dumb Amazon courses and seminars that you should populate your title with 75,000 keywords and it’s absolutely absurd.
Kunle: Okay, okay. So you get a really detailed product page. And do you think a lot of your products rank quite highly just due to your history as a heavyweight seller?
Justin: Yeah, I do believe that you know, now, when you do when you shop, when you check out on Amazon, Amazon is always showing other products by the same sellers. So it is true by having a volume your products are going to appear in front of other people. You know, ‘people who bought this bought that.’ But that is true, I remember you know a couple years ago during Halloween there was a 500 rank of an item and the minute mine received the rank went down to 50 because I was moving like five items a second during the day, so that was able to be advertised to other people. So I agree with that but I don’t think that you need that. I think you can work to make a great selling product without that, I think that just increases it a little bit.
Kunle: Velocity, really. Okay, I came across a YouTube video of yours and you very happily let us know that you had a $1 million dollar sale day. Could you track us back on…?
Justin: Yeah, I’ve had a few of those now at this point but there is enough demand on Amazon.com to have a $100 million dollar day, so it’s there you know. [laughs]
Kunle: Wow, quite interesting. So now that you’re shrinking your SKU list from 1,000 at the moment which expands over the periods of Halloween and Christmas, to 250, what will the 250 items look like? Would they be toys or costumes?
Justin: Well, it’s not…Okay, there’s some dress-ups, some toys, some kitchen. It’s not that I’m shrinking. I’m shrinking it to get rid of the garbage and then I’m going to expand upon it, right. So it’s like if I were building a building, I’m knocking down the building that’s there, right, I’m just saving some of marble and some of the really nice materials. And then I’m going to build a new building. And I want to build it to be the biggest skyscraper in the world. Maybe someday I’ll have 100,000 SKUs. The idea is I’m getting rid of what’s not working and I want to control the situation. And the only way to have complete control over supply is if I own the brand, right. So that important to me. Other way you can have complete control is you’re best friends with the manufacturer and he’s best friends with the CEO and he’s giving you accurate information and he’s telling you the truth and he tells you, ‘Listen buddy, this is everything.’ You know what I mean, so you don’t to deal with that other seller copying you, you don’t have to deal with the price going down. If you can’t control a profitable situation… I’ll give you an example, a major chain store can control their price, right, they can set a price that has a profit already in that price. You go to a store, you order anything. A restaurant, you order a pizza. A pizza costs us a dollar, we’re going to sell it for $8.99. They’ve controlled their model and put profit in the cost of their product. Amazon doesn’t let you do that because you just don’t know who’s got it, you don’t know who is getting it, right. So you don’t have that same ability you do when you’re the master of your domain, when you own your own store. It doesn’t matter if Target’s cheaper or Walmart’s cheaper once you’re in Walmart or Target. It only matters if you’re deciding what store to go to, right. So once you’re inside this store, it doesn’t really matter, you’re going to buy whatever and you’re going to go through the aisles and you’re not going to price check everything at every other chain store in the world, right. So in their model of business, stores have a profit built in. Amazon sellers can’t have profit built into their model unless they’re willing to keep things on their shelves forever. Right.
Kunle: Mmm. That’s why it’s essential you have control over the supply chain, really, and you own your own brand.
Justin: Yeah. So there are many ways, you don’t have to go into manufacturing tomorrow. I couldn’t have done manufacturing without millions of dollars first, so I had to make millions first. I put in millions of my own money, I’m still loaning you know the rest of all my personal millions that I’ve made into this manufacturing company. And the reason is because it is a guaranteed outcome. But before I had that money, I had to buy closeouts, I had to buy… so there’s different levels of business. Are you going to do it on a small level? You know the most profitable money I ever made was the money on the first $700 and I made on Amazon. Not very enticing to many people but the fact is you know, I had roughly that same $40 responsible for that entire $700. I turned it to $200 and then I turned that $200 to $500 but it was all things I bought for a quarter that some of them would sell for $50 because it was a really nice new book and there were none left or what. I remember there was an old VHS movie that was sealed still from like the 70’s and somebody wanted it. I paid 10 cents and I sold it for $59 on Amazon. Those margins were wonderful, right, but you can’t control that either because you don’t know that you’re going to find this great collectible item at your next garage sale. So there’s all these different levels of of control. I think one of the best places is if you have great vendor relationships, find out what they have on the water, what they’re manufacturing, once you understand the demand. And you can go on to the market that way. Or you can buy closeouts, there’s tons of great closeouts but you have to know what that the position is. Like Mattel, for example, in the toy industry and Fisher-Price, these companies play the closeout game to screw everybody. I always like to use the example of the mortgage debacle in the United States where the banks were selling off the toxic mortgages while they were telling, you know, the rating agencies were keeping them at AAA. That’s what some of these giant companies do, they hold the inventory back, they let the price be really high on the Internet and everywhere else and then they dump them 25,000 to like 10 different people all at the same time and they push this trigger and they watch the whole market crash, right. They love it, and they’re sitting there you know as Don Henley said, ‘stabbing it with their steely knives but they still can’t kill the beast,’ they’re greedy pigs, right. So you have to be careful of that as an Amazon seller that you don’t become victim to that, you know, and be careful of the closeout guys, they’re sharks. And find the right people that you trust. Like I buy closeouts from a couple toy companies directly from the national sales manager who truly tells me what’s in the US, what’s in Mexico, what’s in production, that the brand is being discontinued to go in a new direction with the brand. And that’s important, to be able to have those relationships. So it’s not that you have to go into manufacturing tomorrow but what you have to do is be able to understand two things on Amazon: supply and demand. And they both have to be working in your favour to make money.
Kunle: Mmm. And for supply, it’s really down to relationships and just keep sticking your ears to the ground and making sure you don’t broker the wrong deals, really.
Justin: Correct. And if you do, don’t beat yourself up. Just move on, liquidate it, take your loss and do the next one.
Kunle: Yeah. Okay. You really need to be resilient, being a retailer in general, it’s not for the fainthearted at all.
Justin: Yeah.
Kunle: Yeah, so I recall reading an article, actually probably a video, where you said your main warehouses were in Central Florida. But having had a look at your store, it looks like most of your products are now fulfilled by Amazon.
Justin: Oh, they were all… Yeah, when I say warehouse, and that warehouse is now closed, it’s Arizona but, when I say warehouse I mean you can’t, just to be fulfilled by Amazon doesn’t mean that you don’t have a warehouse. I need 56,000 ft.² to bring in my products, you know, and then ship them to Amazon and prep them correctly. So there’s always a warehouse involved. That’s what the warehouse that they were talking about on the article was, was just simply where my product gets delivered to. And then ultimately it all goes to Amazon to be fulfilled by Amazon.
Kunle: Okay so at $38 million, all your products are fulfilled by Amazon?
Justin: 99.9%, I mean there’s a time when Amazon blocks a product from FBA or you know you have a couple pieces and you just sell them quick or whatever but yeah, 99% of them.
Kunle: That’s interesting, because some sellers have said that when they hit a certain threshold they…actually I someone who’s called I think Chad…can’t quite remember his surname but he’s a seller like you and when he hit a certain threshold he decided to bring warehouse into his facilities. It’s just fascinating that you do probably four times what he does and you’re still fulfilling by Amazon. Okay.
Justin: Oh yeah, you can’t not fulfil by Amazon and be successful in the site unless you were to isolate…honestly, let me tell you what is, you have to understand the model, right. You can’t be self-fulfilled and be extremely successful on this site, it’s not even really possible. I mean even if you’re pulled most of their SKUs off. You have to understand why Amazon’s attractive to people. It’s attractive because they can go on the website, they can get it for free shipping and they can press one button once. That’s what’s attractive about Amazon. You can press two or you can press one, it depends. Now sometimes right on the page you just hit the 1-Click button once you found the product you want.
Kunle: Interesting. Mmm hmm.
Justin: And that’s what’s attractive about it. Prime is what’s attractive. And ranks are going to go crazy better. You will never see a top 100 item stay in the top 100 that’s not Prime. Show me one that’s there for longer than a week, you know what I mean. Ever. In the history of this website.
Kunle: It’s a game. There’s an Amazon press release, they signed up a million Prime users in a week last December. They just pour a lot of fuel, marketing fuel and even product and development fuel, into Prime. They timed the drone videos just before Christmas. There’s Prime videos. There’s so many perks you get off the back of Prime.
Justin: To me is, for $80… and it also created a side effect, an ancillary benefit: Amazon Web services which is now a $70 billion-dollar valuation just to use the service space, right, I mean it’s brilliant, they’re absolutely brilliant, just like Apple. I mean, it’s like, you know, it’s amazing.
Kunle: Jeff is a genius and I did some calculations based on… rather than looking at the number of Prime users in the US, comparing it to the population, it’s best to compare it to households, because I could use my wife’s Prime account if I wanted to.
Justin: Oh, absolutely.
Kunle: And it was like 60% of US, about 60% of all US households actually have a Prime account. Which is just mindblowing as a stat. Okay, right. So let’s talk about, just to wrap things up with regards to the Buy Box and pricing and stuff like that, do you have any repricing software you use? Do you use any tools in-house?
Justin: I use a very basic repricer called Appeagle. And the reason is I can’t let my repricer think for me. I have to do my own thinking, right. I can’t tell the repricer to do it because if the repricer does it and I say I’m willing to go as low as $10 and as high as $30, right, well what if Amazon knows that repricer is there? So now will put their product as out of stock at $10, even though they’re not going to sell it for $10, to trick my repricer to go down, and it might be one unit, whatever. Then I’m now selling 3,000 units for $20 less a piece which is $60,000, right, just because I’m letting my repricer think. So I have to be active. I’ve actually created my own software recently that’s lets me know when I’m not in the Buy Box, so I don’t have to tell the repricer as much information. But Appeagle is a very basic repricer, it works well, sometimes they have hosting problems and they get really slow a couple times a year and I just put up with it because it does the job, you know, it doesn’t do too much or too little and I can do my thinking around it.
Kunle: Okay, so it’s called Appeagle.
Justin: That’s what I use.
Kunle: Okay, right, cool. Do you have any tips around reviews? Okay so obviously there are two parts of your business. One is the resale from manufacturers where you go to closeouts or you go to vendors and you buy their stuff and sell. What’s your take on reviews there, acquiring reviews there? Do you bother with reviews or do you just jump on the bandwagon?
Justin: No, I think it’s important. Back then I probably didn’t bother, but I think it’s extremely important to have the customer like it. If they don’t, then it’s a lot of returns, you know, and eventually it will be hidden from search by Amazon if the review gets too low. If you get down under two stars, Amazon will make it very hard to find that product, for consumers.
Kunle: Okay. And then what about your review acquisition strategy for brands you sell or you own yourself?
Justin: What about my brand strategy, you said?
Kunle: No, how do you get reviews for your products?
Justin: Well I make great products that people love it, I mean they just absolutely love it. So I was amazed, I was looking at one of my products and I couldn’t believe it the other day, I thought I might have had 300 reviews and I looked and it was 1,200 reviews. And I was like, holy shit, people really like this you know.
Kunle: Okay, so you don’t use any software? Because I’ve heard sellers who use post-sale software to ask people to review, like Amazon review software.
Justin: Oh. No, I mean I have a few friends that’ll buy a product from me, and I’ll be like, can you buy that, you know when something first comes out or whatever and be like, hey, tell me what you think, you know. And they always say they love it and then they have to write, if then that’s the case, that they got the products for a review. But I don’t think it’s as important as what the customer’s searching for. I think ultimately you know it’s nice to have a couple honest reviews. It used to be bigger when you’d give away the free product to a couple people and they leave a review and Amazon’s policy was they have to say that they get the product free for the review. ‘Oh, I got this for a review, this is my honest opinion that…’ you know, and they’re not always five-stars. Sometimes they’re three or four, they’re telling you the truth but I think ultimately people overrated that. Because a lot of Amazon seminar were saying, oh, this is the trick, tons of reviews, you need a million reviews. And so there was like this little rush, you know, you get this hot moment in a market, where it’s like this is hot, like a hot new song or something and everyone’s talking about it. But I honestly think that what the consumer is a searching for is really more important. Are you coming up there? Do you have enough words in your description that Amazon is going to list you under that product?
Kunle: Mmm hmm. The product should speak for themselves, rather than trying to…
Justin: Yeah, and that’s why I think I come up first under everything I make, is it’s so exclusively directly what the consumer, exactly what the consumer is looking for.
Kunle: Okay. Okay, we’re going to proceed to the final segment of the show which is the evergreen questions, like a lighting round. But prior to that, I’d like to know a bit about you team. What does your team look like now at Yagoozon?
Justin: Well, I mean the team is really… okay, I am in the process of dis-creating Yagoozon is an entity, really. I’m really trying to create one company that really matters to me. And that’s Kangaroo. And my team is amazing. My team is in Atlanta right now showing our product to all the gift stores in the world and they all are loving it, you know, and they absolutely love what we make. And then I have a really great R&D guy that’s a great physicist and just a genius. And I have a very great billing guy. And I have a really great sourcing people. And I have an employee in China and I have really amazing people around me. Yagoozon itself just had some warehouse employees and they sent stuff to Amazon and that’s what their job is. But really my team centred around my Kangaroo company now.
Kunle: Okay, so with regards to Kangaroo, it sounds, yeah, it’s a core now. It’s where you’re going with the business. Okay, okay. Right. Do you hire any agencies or it’s pretty much your team, everything’s centred around your team?
Justin: No, we had a couple, we’re outsourcing some design to a few people and never get nearly as good service. I have art farm with five people and if they get really, really busy then yeah, I’ll outsource it to a little bit of work to them.
Kunle: I lost my chain of thought a moment ago. What I intended to actually ask you was, it sounds like Kangaroo seems to be going out of the Amazon ecosystem and you’re actually seeking distribution from other channels, like other retails?
Justin: Well that is true to a degree. But, that is true but at the same time I kill it, I remember like, one of my favourite toys is, because if you search Amazon for ‘toy food’ right, I come up number one out of whatever thousands. I make a beautiful set. I found out from my factory that after about two weeks of being on the market, that some people are buying it, sending it to the factories in China and my factory actually got it saying can you make me this exact item? So somebody thought that if they made the same item that I made, you know… and they were originally trying to counterfeit and we told our factory, ‘You cannot counterfeit our brand and we see a seller sell with our brand we’ll sue them in a second,’ like we won’t do business with your factory. And they’re like, okay, we’ll make a different package for them, they have to have their own UPC, we understand blah blah blah. I was, well, you can’t take our business and sell to them. But the reason I tell you this story is that they can make the same exact thing as me. But that doesn’t matter. I have 167 five-star reviews, I’m number one. And do you know what’s special about it and why? Why if you look at everybody else that’s doing these big ones and you look down here you see this KidKraft one about in the number five spot, they’re offering 105 pieces. So when I noticed that there was a lot of demand for pretend and play food, the first thing I wanted to do was give them better than what was already there. So the best ones on the market I saw was I saw Step2 offer 101 pieces and KidKraft offered 105 pieces. So the first thing I did was I said I’m going to stay at the same price point but I’m going to give 120 pieces. I’m going to give more, you know. So I mean, I love that revenue. I sold out my entire PO in two weeks in Christmas. Of course I love that Amazon aspect of the business. But yeah, why not sell it to Walmart, Target, and everybody else too, right.
Kunle: Right, once you own the brand, why not. I agree with you for sure. I mean that’s what the Walmarts do anyway, they sell their brand side by side other brands.
Justin: Yeah, exactly.
Kunle: And it all depends on that profitability, really. Okay, now let’s move into…by the way, before we move into the lightning round, how was your Christmas? How was the last Christmas?
Justin: It was good. My Halloween I actually broke an all-time record, I did $10 million in one month which was, I don’t think an Amazon seller ever did $10 million in the month of October since the company’s been around.
Kunle: Congrats. Wow, I’m very privileged to be speaking with you. Right, now so this is the evergreen question section and it’s a lightning round. I will ask a question and if you could use a sentence or two to answer it it would be great, brilliant.
Justin: Okay.
Kunle: So what are your future plans?
Justin: My future plans are to create the largest manufacturing company in the world, streamline manufacturing to be the next Apple, maybe create the first flying car, maybe the first robot that thinks and breathes, I don’t know but it’s going to be much bigger than hustling product on Amazon.
Kunle: World domination. Okay, right.
Justin: [laughs]
Kunle: How do you hire people?
Justin: How do I hire people? Well, I like to see what they can give. I give a lot so when I meet people a lot of times they’re all talking about what they want. We just interviewed a guy from Texas, all he talked about was how many weeks’ vacation, where he wanted to travel, that he wanted plane play for his kids to come visit every week. That he wanted weekends off, that he wanted this much money and he wanted this for insurance. Then he wanted an apartment and he wanted a vehicle and then I said, ‘Are you going to do anything or?’ Do you know what I mean, it was like that. So I look at people that they talk about all they want to do is what they can give. Because I know I’ll give to them, I know I’ll take care them. I’ve done surprise bonuses from $10,000 to $100,000 to employees before because I know I can do that. Question is, are they prepared to commit and give or are they using me as a job or me as a career and a family that they wanted part. So me and David, who is my partner in crime here and my Executive Director, really go out and look for those types of people that can breathe, breathe the company and its mission.
Kunle: Okay, okay, sounds good. What are your three indispensable tools for managing Kangaroo? I’m not going to talk about Yagoozon now.
Justin: What are my tools to manage Kangaroo?
Kunle: Your three indispensable tools, so what tools, yeah. Your three indispensable tools for managing.
Justin: You talking more inventory management like software and stuff or?
Kunle: No, I mean like tech. So what kind of software or it could be your phone, it could be your email, it could be…
Justin: No, I mean we have a software called Fishbowl. We also use a basic QuickBooks, so we’re able to manage our inventory, see what’s on the water, see what’s coming, look at our receivables and our inventory at the same time, just like a regular company. At some point I think we’re going to develop something much more sophisticated once we’re a little bit bigger. You know maybe, a lot of companies have their own software developed. I won’t go to Oracle or something like that, I’ll have my own guy who graduated at the top of Yale to make it, you know he makes me software in two seconds when I ask him, he’s like boom, like four minutes later and I’m like, wow, how id you do that, I’ve been trying to get that for five years, you know.
Kunle: [laughs] Okay. What’s been your best mistake to date? By that I mean a setback that’s given you the biggest feedback.
Justin: Hmm. You mean within the business?
Kunle: Yep. In the context of our discussion, so.
Justin: I mean, well, it wasn’t my mistake. My vice president of Yagoozon died in March and I actually hired him from Amazon and he was a top employee over there. And it was horrible, how it happened too because I mean he was diabetic and just, you know I found his body in my house. And that was a big setback earlier in the year for me and I wasn’t able to… I just became a little bit more destructive and a little bit less thoughtful about the way I did business for the summer. You know, and I got serious again in late July or early August but I took about four months of screwing off.
Kunle: That’s… So sorry to hear. That’s a tragedy. Okay. What’s one piece, just one piece of advice you can give Amazon e-tailers keen on 2Xing or 3Xing their Amazon sales?
Justin: I mean so if they’re just looking to 2X and 3X on Amazon sales they only have to pay attention to demand. But if they want to make a ton of money, don’t… my advice is do not… so just like a woman, you wouldn’t marry her before you slept with her, before you took her to dinner. Don’t get into buying product until you know intimately that product. You know what I mean. Know it, know its story, know where it is. Know how much is out there. First you want to know your demand but after that, know all that other detail so you can determine 100% profit, you know you. If you meet a woman, you found out she killed her ex-husband, you might consider not going on a second date with her. And people don’t ask those questions, ‘Did you kill your ex-husband?’ No, they just go buy it, you know, and find out. Because a lot of products killed their ex-husband, let me tell you that. And you’re going to find that out once they land at Amazon’s fulfilment centre.
Kunle: [laughs] True, true, true. Okay, final question is, if you could choose a single book or resource that’s made the highest impact on how you view building a business or growth, which would it be?
Justin: It wouldn’t be a business book. My greatest book ever was Illusions by Richard Bach, you know. I think it’s the, I mean it just shows that everything is really from the mind energy. Everything is really the mind and you can mend the physical universe with a change in thought pattern. So I would say that’s my favourite book of all time was Illusions.
Kunle: Okay, fantastic. So Illusions by Richard Bach. Okay, fine. So how can listeners, if they wanted to get in touch with you, how can they get… are you on social media or what’s the best way to…
Justin: Yeah, we have a Facebook group and stuff like that, you know, there’s the Yagoozon Facebook. I get all those messages and stuff like that. And then we have one for Pennies 2 Platinum too, maybe even Kangaroo now, so.
Kunle: Okay, okay, brilliant. It’s been an absolute, absolute pleasure having you on the show, Justin. Thank you for sharing your thoughts on Amazon journey. And best of luck with Kangaroo, it looks like it’s doing fantastically well, I trust you…and cheers to world domination. [laughs]
Justin: Thank you so much, Kunle. I appreciate it.
Kunle: All right, cheers. Bye.
Justin: You have a good one.