AS 76: How Dan sold 12 Million+ Selling Wholesale Products
06 Dec 2016
Today I’ve got an invincible king on the show, Dan Meadors. Dan and his business partner Eric Lambert started selling on Amazon in 2011 using a credit card with a $600 limit and in a short time, sold 12+ Million. He goes through exactly how to sell wholesale.
In this podcast you’ll learn:
- How to sell on Amazon
- How to sell wholesale on Amazon
- How to scale your Amazon business
- How to buy product
- How to decide what products to buy
- How to hire employees as you build your business
- How to operate your business strategically and make decisions
- How to know which products source well on Amazon and which ones do not
- How to move from retail arbitrage to a wholesale business
- When to get a warehouse
- How to choose a business partner
- How Dan sold 12 million in wholesale products over the past 4 years.
- What not say to new vendors
- What is the criteria for the perfect wholesale product
- Has brand gating affected affected your ability to sell wholesale
- What is the criteria for the perfect wholesale product?
And much more!
David Aladdin: Great to have you on the show Dan?
Dan Meadors: Hey, It is fantastic and I have been mostly watching this show all time?
David Aladdin: Can you tell us in the beginning before your first million when it all start?
Dan Meadors: Well we started out with doing with doing retail arbitrage at the airport, both employed with awesome job actually and we one of our buddies had he was well over six figures and he came and he gave his two weeks’ notice and we just started bugging him like what is going on? Like why are you leaving because in Kentucky six figures salaries is really high salary and he was like no man, he was just like making more money at home selling stuff on Amazon and I was like Are you serious? I said what is this so he took us out to Walmart to show us well what was what he did and this was retail arbitrage and we were doing retail arbitrage at that point and we got over $600 a credit card, actually it was a personal credit card when I was like, it was really strange because I got paid pretty well and I don’t had to have but I didn’t have any credit like I never needed credit for anything like you know I just bought everything I want so when I first got my credit card it was $600 limit and I was like I guess we would see how this work. So we went out and we bought some cool stuff and then we sold it on Amazon and you know it scared us at how fast it sold. We were like well this is really cool. So we went out and we did it again and again and again and about the end of the year. . . that December we had done about $60,000 in sales all from the magical 600 bucks and we decided that hey we if we imagine if we did this full time how much money we can actually do so then we decided to go full time in January 2012
David Aladdin: So, when you guys first started were you guys working at the same place? What were you guys doing?
Dan Meadors: We were working in the internet retail company that sold off it’s website, it sold toys and games like that. . .
David Aladdin: Like similar ecommerce business and then you guys transitioned into your own myth
Dan Meadors: Yeah it was definitely similar and but it was different because that was a really established website and like any manufacturers they wanted their products to be on that website like so they would go you know we got to approach when I was there we got to approach a lot about caring people’s products and as an Amazon seller we don’t get approached very often like hey man when you sell my product on Amazon like there is half of it and it’s more like you reaching out to them and it’s just a different dynamic
David Aladdin: So, 60,000 in the first year between two people and then you guys decided to go and hit it full time.
Dan Meadors: 60,000 in December.
David Aladdin: In December of 2011.
Dan Meadors: We did about a 150,000 total.
David Aladdin: Ok, how did you guys, when did you guys get your first million?
Dan Meadors: Um well then, we that year went full time, we did 850,000 in sales and our retail arbitrage, next year we did 940,000, all retail arbitrage an then the following year after that was our first million dollar year. We transitioned this in 2014 and in July we transitioned into wholesale and we did 1.28 million that year and then 2015 we did 3.9 million and then we probably land up around 7 million this year
David Aladdin: Awesome, a lot of people have the hardest time quitting their jobs what was and I know it sounds easy to say now but Eric was just like I am selling on Amazon and it’s pretty good but you must have been pushed over the edge somehow
Dan Meadors: For us I mean, Eric it was really strange, I mean you know it’s kind of a perfect for us, Eric is, he came to work on that job with me for a while like he been there for about 8 months or a year and but before that he been claimed professional poker player for nine years so it wasn’t a big transition for him, he were you know we were both pretty risk taking guys, we believed and you know we had enough evidence that said hey we can make money big in this we just need to have the time to expand it.
David Aladdin: I think it’s got to be something with poker, I love playing poker and I know a few people that went to engineering school that played poker and they don’t do engineer any more, they became entrepreneurs or full time poker player and they have like side gigs going on so there might be like a secret golden nugget that you play poker and your life will change. So, what’s your partnership like is it a 50-50 side.
Dan Meadors: Yeah, we are 50/50
David Aladdin: Very cool. That was like a pretty easy decision to go in
Dan Meadors: Yeah, I mean we were both, we were both, when we started our company we were both equally invested into it like it was an easy decision plus we were like, we both knew we wanted to develop a job that we didn’t wanted to develop a job but we wanted to develop a business and we had a very similar mindset so the decision for us was incredibly easy on our partnership split.
David Aladdin: You guys have employees, you guys have warehouse, when did it start going crazy like.
Dan Meadors: It was in 2014, it was like the very between in 2014 that we, we had a warehouse, we graduated several warehoused in that period but it was in 2014 that we really decided to make a big jump and it was we brought in our first employees in December 2014 and then we brought on our. . . then we moved into our warehouse, our current warehouse in January 2015.
David Aladdin: How big is it by the way?
Dan Meadors: 10,000 square feet.
David Aladdin: Ok and then were you guys doing inventory like a garage before that?
Dan Meadors: No we had our, whenever we started our business the very first day we had a warehouse, Our first warehouse was a 250 square feet, it was more of an office than a warehouse, We moved out there within a couple of months into 5000 square foot location and then we moved into a 3000 square foot location, yeah but no way my wife would let me just pack boxes to a sale in a similar situation, you know we weren’t going to be doing it from the inside of the house.
David Aladdin: Yeah, my girlfriend will be kind of mad at me
Dan Meadors: Right we could have easily done our volume outlets of the house, it was just my mom and wife was not accepting it and it was like you know no you guys are not bringing a bunch of stuff here.
David Aladdin: I’m guessing she’s receptive now though with the number you guys have gained?
Dan Meadors: Yeah, she enjoys it now but it’s, it was a transition for her too, it was a transition from whenever I was being employed to running an Amazon business you know there were no guarantees that we were going to do well, we believed we would do well and we were operating off a pretty setup, we still print out with the same pintables of today and I think that’s what contributed to our success there
David Aladdin: It sounds like you guys have a very solid partnership going on, what types of tips you have like sellers are looking to add partner to their business
Dan Meadors: I mean I have got some tips that will help but for us it didn’t come together like that, we started as a beginning as a partnership like we both, adding a partner is a different dynamic, A lot of we get that question a lot as our partnership is really good. We are really open with each other, we Eric bring something different to the table like he has a different mindset than I do when it comes to how we run our company, like how many types of products we got and things like that. We both are relatively very extreme guys and we settle in what right every time and it really works out well but as far as partnership we believe that the primary thing is that you don’t add a partner because you are lonely, you need to add a partner that brings strategic value to your business like it needs to be more about more than money like you know we get this question a lot like I was looking to get a partner who would get my equity buys, I was like ok what else do they bring.
What else are they brining besides money like what skill set, what doors is he going to open for your business and most people don’t have an answer for that because they don’t having somebody to bounce off ideas is like yeah that’s an important part, having someone bounce off its ideas is an important part but it needs to be you need to moving to some important type of goal if you want your business to grow and in that if you are bringing in a partner, it has to be someone bringing strategic value to business.
David Aladdin: So, let’s dig in deeper there so what are your strategic advantages versus Eric?
Dan Meadors: Eric is more logical in terms of processes, he’s very good in building out processes like because the way he looks at things he, he is logical and he will sit there and analyse the project until he completely understands what is going on in each step of the process so that’s like really important now that we are scaling, super important and also whenever we were buying product , he was a lot more disarming on how what type of product he was buying whereas I was resistant in buying more products like I operated under a different mentality like I operated I do things right majority of the time like I try to make many decisions as possible and with the flood of decisions with the flood of purchases and things like that like inherently will grow because the majority of them were correct.
So there’s a different mentality like he is very process oriented, I am very like I move the business in the wholesale because I knew that we need to make that logical jump, I was the one that pushed to hire employees because it was necessary at that time to scale I know it’s awkward but I tend to be more aggressive to change and he supports that and that’s the great part, he supports my ability to make quick changes and it helps us move and grow quickly.
David Aladdin: I feel like you are trying to say that you are more risk aversive than he is. I feel like he will think like taking the most calculative steps than you will take most of your gut instinct on it. It’s awesome so it’s like the wholesale decision has been paid off, almost doubled between 2015 and 2016. Not that you guys were doubling and tripling.
Dan Meadors: It’s great as far as the decision in movement in the wholesale, there’s a lot more components for us that make wholesale work and as a whole it’s a very scalable system which plays really well in some of our strengths because once we establish like this is what we want our business to do like we want to be able to reach out to these manufacturers, we want to able to get these accounts who carry these types of products like we developed a system to do that’s and it’s about training the employees and working with the employees to have them scale it.
like you don’t need to have domestic employees like we have, we don’t do any outsourcing of our work, we systemize it and we have a team in the Philippines who just get ton and tons of leads all the time and they do all our initial contact to manufacturers, it’s a growing process so what we have done over the past year and a half we created business like honestly David I mean there’s no joke like last week I worked 6 hours.
Every time we started working on this business, we trained our mindset to replace myself in this position, I want to make our employees bigger, better and stronger than I was doing this job. So we focus all of our energy on number one creating system number two building talent that’s better than us.
David Aladdin: There’s a lot there, so let’s go deeper. I noticed that you mentioned the Philippines and you started, let’s start from the beginning, your decision to go wholesale like let’s talk about what made you guys do it and then let’s start there
Dan Meadors: Ok. So there were a couple of components and we did 850,00 sales, 940,000 sales and that was all retail arbitrage and it was like yeah we were making great money because our profit margins were amazing , you know typical retail profit margins but I could literally could not invest any more time like there was no more time to give and so it was like we did a great year and made a few hundred thousand dollars and but is this really what we want to be doing like you know we both let great jobs where we weren’t working as hard as in our own business like literally that just made me a slave literally to my own business so we started brainstorming different scalable models, we were looking from the perspective of this it doesn’t require any more time to do more sales, number 1 wholesale, number 2 private label, number 3 like a closed out style, more aggressive closed out style purchasing model liquidation and we started looking internally at those individual at those models and for us I think private label is a great model.
For us it wasn’t a skill, whenever you started looking at it, there are certain skills at private label like you have to develop packaging, it’s a lot more complex to get your product here than versus ordering domestically. There are more moving parts, you we wanted to take in something that we could train somebody to do it and they would be able to take that position for us. With the closed-out model, there are a lot of benefits to it but it is so cashy to as you are buying big giant amounts of product that you may not sell from 3 to 6 to 9 months. It was like I don’t like that whole much of inventory.
With Liquidation, the margins are huge but there are a lot of problems, it’s just a dirty business you have to go and check if this product is broken or not broken and sale, a lot of issues. So wholesale made a lot of sense to us, number 1 we can create a model where we can train people to do stuff, number 2 we were able to run as late as much as possible which mitigates a lot of risk. And that’s why we settled on wholesale because we could not give more time.
David Aladdin: How many SKU’s you guys launched per month with wholesale?
Dan Meadors: I mean all the product we carry are already established, it is like already established products on Amazon that we carry. With the initial orders we tend to add about 10 to 15 accounts per month right now.
David Aladdin: Right, that would be like work lots faster than private label work I mean you are developing products like 2 to 3 months, it’s a craft to get the perfect product and get it to US
Dan Meadors: At this point we carry about 600 products.
David Aladdin: Very cool and so you guys have been doing this only since 2015 in terms of wholesale and I’m guessing you guys do also private label as well right?
Dan Meadors: We did a couple of private label product, we did actually incredibly well with one of them but it was much more intensive for us, it was like we were operating outside the model we were supposed to be doing and it was like we had to create exceptions in our business to do it and whenever we started looking at that we were like so for us even though this product was incredibly profitable it makes more sense for us to continue doing wholesale because it fits into our model and we don’t have to involve ourselves and the business continues to grow without you know without our time and so we did a few and at that time it was just more time intensive than we spend on wholesale.
David Aladdin: What’s your guy’s criteria for picking a perfect wholesale product?
Dan Meadors: The products we pick initially, primarily think we care about is velocity like we look at products that we can sell like if not that sell whole and we can sell at least 90 units per month and the reason we do this because that’s a product with great demands like for example there are three or four sellers all competing for the box of the product and suppose it’s 3 and I’m coming onto it and I can sell at least 90 times a month that means a product is selling 360 times a month on Amazon.
There is a great demand for product which mean that it is very unlikely that I am going to be stuck with any inventory like the worst thing that can happen is that I have to take the time of the loss of the product to get rid of it and that’s never reorder like we never buy 30 days’ supply of product so it’s like if that product doesn’t work we will say stand up losing $2 a unit like I lost $180 but whenever a product sticks like in the same scenario I find that product and making $4 a unit profit because it ends up making out perfectly. It’s like that product is going to make me $4 a month for the next 15 months on an average from one of our sales. So $4 per month so look at your return rate, it’s like I am making $360 a month for 15 months on my products.
David Aladdin: Yeah you saw them like in 10 mins of research someone else did. That’s awesome so basically 90 units per month velocity not a lot of FBA sellers selling the same product
Dan Meadors: You know for us is how many competitive sellers there are like let me give an example, like me and you are a product and I’m selling it at $25 in the buyer boxes and you got you price at $35, does it matter you are on that listing like you are never going to get a sale right at $35. So we are only concerned about the people that are in the intention to actually get sales. For the fast math we always do 2% like anybody that would be $25.50 or less we consider competitive and we look at the offers in that range so let’s just say there’s five people priced between $25.00 and $25.50 then that’s the amount of sellers we calculate, we don’t, there could be 500 sellers on that listing as long as the right amount are competitive like we want to sell 90 units per month so like I am not competing with a guy who is selling for $35.00 to be honest.
David Aladdin: It’s awesome so let’s say you found that sweets product for 2% spot and you are good with that product and your decision to find about that vendor, Is there like an easy way to do that, I feel like you have to.
Dan Meadors: I am going to tell you a bigger secret it’s the easiest thing in the world like here is the thing we use our resource modelling right like when we first started doing wholesale we were like, we were looking for wholesalers hoping to find products, we stopped there like it was like finding a needle in hay stack so now we just go and identify awesome products like I told you 90 units per month, look at that product and we go hey I can sell this 90 times a month, I just find who make the product or and that’s where I start so you know with a product it’s made by company X, I google company X and it tells me the contact information, reach out to him and contact him and 9 times they will get back to you and for whatever reason they can sell or can’t sell to you whatever or if they don’t distribute themselves, they will send a list of distributors there that they use to purchase that product.
David Aladdin: Did they ever get the feeling that you are an Amazon seller and
Dan Meadors: We tell him like we use a website that explains our company and it just tells some of the cool stuff that we can do on Amazon to help your product but it’s very clear we are an Amazon seller and that’s like the primary hurdle that most people run into is that a lot of companies don’t want to sell to Amazon sellers like they realize the dynamic of Amazon and they are like I’m selling company X’s product three hundred times a month and you start selling the product, that does not mean it’s going to sell 600 times a month now that we are splitting sales so most companies are starting to realize that.
So they really don’t want to sell to Amazon sellers so what we do is we work with the brains, we don’t treat, I don’t consider myself to be a retailer, I consider myself to be a brand partner like we identify the areas where we can help that company to grow and increase their sales and institute those changes to help their product better on Amazon.
So that’s the way we try to work with them yeah we are an Amazon seller which is way better than everybody else like that’s why you should work with us and most companies were pretty receptive to that probably given the amount of time that we have been doing it and the amount of companies that we are working with now.
It’s very easy to get us accounts but that’s most people drop the ball because they run into their initial no and it’s like ok we will go for another product but whereas we get excited when the company tells us we don’t want to sell the product to us like that makes it high priority because everybody else that’s been coming to them is being turned away and they understand it, I understand that product is going to be really good for a really long time
David Aladdin: Are you guys strictly Amazon distribution or you guys have multiple means, I have a few wholesalers who approach me and they tell about their company and I look at them and they are Amazon sellers privately and I am like I don’t want that wholesaler competing on my private label product but do you guys have plans to sell out of Amazon sector too?
Dan Meadors: We sell on eBay as well but to be honest with you the only reason we sell on eBay is that it makes it convenient not to. It’s a very automated process like if we want to create listings and stuff there is no way, a lot of people go into the thought process that constantly diversify channel and I think they lose focus later
David Aladdin: I said that’s what I was saying to. They say there are not enough sales on eBay, it’s too risky to sell on Amazon but then if you ask them what the channels that sell well are, they just like diversified it.
Dan Meadors: You hear that a lot, it’s too risky to sell on Amazon and it’s ok, think about the statement itself, now you are going to diversify your attention to detail to sell marginally, marginal amounts of products on other channels it’s like if you are paying attention to your Jet sales every hour you are paying attention to your Jet sales, is an hour you are ignoring Amazon and when you are ignoring Amazon that’s when I don’t believe people get suspended for no reason. I believe there are warning signs, there are watching your accounts.
So like we watch our accounts like hawks, instead of trying to make more sales on other channels, I still make sure that my account is fully compliance on Amazon all the time. Like we have one of our virtual assistant and that’s all she does. Like she deals with refunds customer services all those aspects but she checks our return rate on our products to see if there’s an issue, I mean she does every other possible thing like if there’s a change notification she goes and verifies that versus our manufacturers page to make sure the change in accordance to what they would want.
So yeah it works very, very attentive to detail on that aspect of our business because as supposed to diversify we chose to be just better on Amazon, we try to make our self just better all the time.
David Aladdin: NO, I think it’s a wise decision, I have diversified but I don’t see much of sales from other channels and it’s taking a lot of time. So sometimes the best advice is just stick on that one channel and it does really well like it’s not a lie.
Dan Meadors: But if you spend that same time like you just diversified in other channels, if you just spend that same time in improving your listing, improving picture, doing Amazon PPC like do you not believe know that your sales will go up more proportionally than your sales on other channels.
David Aladdin: I don’t know but if you have ever tried launch on Jet, it’s seriously hard, they don’t have a listing dashboard, you have to do through an external dashboard that connects through their API list and then you have to do the Jet runway program it’s insane.
Dan Meadors: I mean we thought about all of this, doing Jet, Walmart like we were accepted on the Walmart platform, we were accepted on the jet but in like Walmart role, it says the price cannot be higher than price on other channels and it’s like now I’m doing Amazon like you have seen the cost for that as I can’t legitimately hold my margins so now I can actually comply with their roles and make our prices the same, I am doing so much work to make less money by selling on that channel and if I don’t like I say I price the products you know including that mark-up for multi-channel fulfilment on Walmart, it’s like now I am just literally breaking the rules.
I am building an armour around my business that is knowingly breaking the rules of the platform, like let me ask you this, like on Jet are your product the same price on Jet as they are on Amazon.
David Aladdin: Well the thing is that they are still in review like for the last six months, I don’t know why. It’s the biggest joke ever. It wasn’t fun doing it, I think I signed up to two subscription services, one to do multi-channel, I don’t use “jello”, I use “ecomdash” and so there is app subscription fee and then apparently, they use subsidiary software, it’s called “listonjet.com” and that’s a subscription fee too, I’m like what’s going on, I just do the process and I am stuck in review because of the jet accusation.
Dan Meadors: Sure, for us that means, we went through this like we need to diversify like what are we doing here like we need to be better what we already do, we need to provide more value to our vendors, we need to add more stores to our line, and just concentrate on growth that way like pay more attention to our account that they are not endangered at any points.
David Aladdin: Have you ever, I guess I have this concern but have you definitely know better but have you ever because there is brand grading on Amazon now and you know there is wholesale products and brand of products do they ever change their mind on wholesale product?
Dan Meadors: Here is the thing we love brand grading like brand grading has happened to us company so far and what it does it allows our you know what the biggest problems in the past you know the company comes on and manufacture does not know who they are, how they got the product etc like I said we are really upfront with our manufactures, like we tell them we sell on Amazon, we are really good at it and now they have to know every individual seller on the listing you know if some guys is an idiot they can chose to stop selling to it. Like he will be allowed to list the product, doesn’t mean that they have to sell to him. It gives them a lot more control of the listing; which really preserves the value of the listing long term.
Like the average line we carry was, we hold around 90 to 92 percent of the products that we still carry from day one. So the long jeopardy of the lines we carry, we imagine it would sell around 96 to 98 percent. Like it’s amazing. We want to make the lines profitable over time so we are super excited about brand grading. A lot of people had trouble with that though you know we really identified like what we need to do to get ungraded with the brand and it all has to do with your letters of authorisation and your invoices. Like all our invoices are direct from manufacturer.
So there some things that still things that Amazon want to see that sometimes they are not there and you have to go back and talk to the manufacturer that hey they realize it’s strange but can you put this on there for me like here’s what I am working for Amazon like hey no problem here we go but yeah it’s kind of frustrating for a lot of people but we are really excited about it.
David Aladdin: Let’s go more into detail, you noticed a product authorization form, do you guys do that with every single manufacturer.
Dan Meadors: It wasn’t necessary and we get a letter of authorization for every single product. We didn’t used to do that but now Amazon can close a listing any time and just be like this brand is now ungraded and we want that letter of authorization on hand to give it graded as fast as possible.
David Aladdin: And so that will get you inside the geek. Right?
Dan Meadors: There’s supplier seller brand information they want to see which usually is either three invoices or a letter of authorization and that will let you inside to sell the product. Like it happens 180 a month, it’s crazy.
David Aladdin: Specially during Christmas so what do you not say to vendors like there’s a lot of good things to say like which qualify for example I’m an Amazon seller.
Dan Meadors: We don’t have that aspect, the things we like to say to the vendors are you know approach conversation to the vendor through different aspects, we ask ourselves two questions and it’s number 1 how can I help you? And number 2 why you should care and it’s like if we get answers to those we don’t actually talk to the vendor. So if you think about it from my perspective it’s easy for everybody as an Amazon seller you know to think about how can I get mine but if you approach from the perspective how can I help you get a lot further so that our mentality is how we can help people and that’s what we are going to talk to.
And that’s what we get accounts because approaching from the perspective that here are some things wrong with your product and I know we can fix, here’s how we are going to fix it, you know to sell your products. People are more compliant to work with you when you are coming from that perspective. I don’t think anyone is off limits if you are approaching it right. The only thing that I would not do at this point is I would not tell . . . like if a vendor asks you to sell on Amazon and you say no and with the intention of selling on Amazon I think you are opening yourself to a lot of liability, so that would be my one thing I wouldn’t say I would say not to do, is don’t lie to them.
David Aladdin: I always think people like people like you take all the good vendors from Amazon but I guess there are thousands and thousands of potential vendors that aren’t even on Amazon right now.
Dan Meadors: Like we don’t even add products to Amazon, like I don’t look for products on Amazon I would legitimately like here is the thing go to an Amazon retail page, look at from your private label guys, private label guys are so good at what we do is silly and the reason is that they have the mindset, they know how to make product sell better on Amazon. Like take your eyes and go look at any detail page on Amazon and if there is something wrong with it like you would be like hey this could be done better, that’s an opportunity for a project for you to carry.
You can identify this product has only two pictures on it like they are there six pictures available like now that’s an opportunity for you to sell that product and for you to become a brand partner.
David Aladdin: Where do you guys see your wholesale, business going?
Dan Meadors: I usually think within the next five years we could do hundred million dollars’ sale per year.
David Aladdin: Ok what kind of warehouse do you need though?
Dan Meadors: I don’t think it’s much bigger than this but I would tell people if I start tomorrow, if I were to restart my business tomorrow I would not have a warehouse, I would have like I would have outsource to prep centres and stuff but we already had the infrastructure, before that I had the infrastructure for warehouse, before I knew prep centre exist like I didn’t know that was the thing, If I knew I would just do it. We used prime zero prep a little bit last year and they did an amazing for us and it was so much easier than having own warehouse and if I did over a million, I would not own warehouse, would have a prep centre.
David Aladdin: I have been like kind of fighting myself back and forth about it because I had quotes from a warehouse provider. It was to store a 40-foot container, it was about 5000 to 7000 totally annually you know they wanted to keep their inventory there. So I don’t know if that’s saving me money or I could figure out my own warehouse location to store their . . .
Dan Meadors: If you are looking at from a storage perspective it might be cheaper to store it in one of those storage units cheaper but are you storing it and ready to ship capacity and things like that. With somebody like that it’s like we don’t and that is another difference with the model to is like we don’t store a lot of inventory. You know I may have like 30 pallets landing this week like come in but we are going to be shipping 30 pallets out. So you know we don’t like cheap back stocks of inventory, generally if we do it is like because they were offering a huge discount, some kind of weird special or something like that but we are really dead sale on ordering. You know we order 30 to 45 days once every inventory at a time.
David Aladdin: If I told you that you would be having 40 shipments coming through your warehouse 5 years ago what would you say to me?
Dan Meadors: It would have been hard to believe honestly, we did knew we wanted to scale our business but we didn’t know, that’s like a disconnect in most people like whenever they start selling on Amazon it’s like, they don’t really realize the amount of infrastructure needed to move from one level to the next level and that’s why starting out with the prep centre is a great thing because that avoids you to having built that infrastructure, because we had to build a long way like it took a lot of money to operate a warehouse, you can just avoid that with a prep centre.
David Aladdin: If it’s possible can you go over a checklist kind of go through for a solid wholesale product? I know we covered it a little bit.
Dan Meadors: Sure, I mean the primary thing is can I sell this product 90 times a month, that’s what the first thing I want to look at is because I care about keeping my money moving and product, I am not a product collector, I want to keep my cash flow as a part of the business. So that’s criteria number 1, criteria number 2 Amazon does not carry this products like I don’t want to carry a product with Amazon unless because . . . Amazon itself doesn’t care of the bilateral so if me and you are carrying a product I can tell you approximately that I am going to sell 50 percent if we’re the same price and you are going to sell 50 percent and that may change by 1 or 2 percent based on if you are a bigger or better seller than me, like you got better matrix, like you may sell 2 percent more than me or 3 percent more but it is going to be really close, right.
Like with Amazon, it doesn’t really share to buy box like even if they do it’s very in-frequent. It takes the perfect initial estimation and makes it very hard to engage what really actually is going to happen. So we don’t carry products with Amazon, the third criteria is we don’t carry private label product and the reason for that is for example if I see your product on Amazon is very unlikely I am going to approach you and it’s because most private label sellers are very investive in their brand and you know particularly in the Amazon space is that they determine themselves to be a private retail label whereas we want to deal with manufactures and brand owners in the truer sense. Like we want our manufacturers and brand owners to focus on the marketing and want to focus on the retail side and we believe that’s how the brands are able to scale and grow.
So, it’s I can’t offer you, to make it more important is you concentrate as a private label seller on being a retailer and I’m not sure that I can be a better retailer than you being but a company whose focusing on the market and things like that like I can be a better retailer than them.
David Aladdin: Cool. Do you guys have eCommerce too or you guys just ship through Amazon and eBay.
Dan Meadors: We have a couple of eCommerce stores too but we don’t do very business out of those at all, this was in our diversification phase when we started building eCommerce stores and stuff but you know we decided it’s actually safer to be just an Amazon seller. You know we tell people hey yes, we have proper offers from Amazon, we have all these websites but I promise you like don’t let that factor in whenever you are selling a product. We are going to do little sales on those that’s not going to matter and I am like okay like we are very upfront what those properties represent.
David Aladdin: Yeah you know that knowledge is very good, someone trying to get into wholesale and thinking about starting a website as well and you know don’t waste so much time on that aspect of the business just because the real money is on the Amazon side of wholesale and that’s cool, we got about ten minutes left, let’s talk about your employees when you got your first employees, what were you guys thinking about there?
Dan Meadors: So we wanted to hire an employee who would handle our processes, to help handle our processing, it was me and Eric at that time and we interviewed like several people and two guys were really, really awesome and then and one of them was going to be a really awesome processing guy and the other one was like he was going to come in and shockingly intelligent, wow, he understands things that, he clearly understands things he shouldn’t be understanding from one conversation.
So we ended up hiring actually both of those guys, we couldn’t afford two employees at that time, we could only afford one but we were like we definitely need the processing guy and if this guy works out, his name is Matt, he is actually still with us, he is incredible, if this guy’s works out our business is going to grow exponentially so we ended up hiring both guys and sure enough like the very first, it was 45 days that Matt was there like a complete waste of money.
He would watch me work as finding as good wholesale accounts our products and they would watch me contact them and then eventually I started watching him do the same work and just replicating that process and then at the end what actually happened was instead of me looking for products and calling all those manufacturers, now we were doing two times a speed because I was doing it and he was doing it. So you can see the jump from 1.28 million to 3.9 million that was it, that’s where we were able to replicate that process.
Then we eventually decided that him looking for products was not profitable task which we can outsource so much cheaper so we started hiring our team in Philippines and now he has a consistent stream of products and all he is doing is, he only talks to the people that tell us no, they don’t want to sell to us, that’s Matt’s job. He talks to them, educates them who we are and how we can help them.
David Aladdin: He is a seller. You think the most important part was actually the product source but in a sense you guys have pushed it even further, you narrowed in the guys that reject because you use product that’s not relatively available to all sellers, you try to get pass that last barrier.
Dan Meadors: It’s funny because whenever you start applying for accounts
David Aladdin: On a side note, I think I just have to open a secondary seller Amazon account just because I wouldn’t want the wholesale price side by side next to my private label products, well a lot of my customers go through my brand page and if they start seeing I’m selling toothpick will look weird next to my products which are branded, part of my brand so.
Dan Meadors: I mean it’s easy to open like we actually have two accounts because the thing is it adds a lot of value, the thing you are doing now like add a product you want translates the same as in wholesale, it’s not that much different to private label, it’s very similar actually, it’s diversified you can do it on the same state with Amazon by adding a separate acquisition strategy that makes sense.
David Aladdin: You got me thinking now, I have got to re analyse everything ever done in my life just, but it’s interesting, this conversation has sparked a little imagination, I’ll take a look into it. I see between private label and wholesale, a lot of, the biggest thing is cash flow, do you guys have cashflow issues even in 7 million or
Dan Meadors: Well here’s a thing, there is a primary difference between the model rights, whenever you order a private label or replace your private label order you are ordering a 40-foot container that, it’s a lot of money right. How long does it take you to sell through that 40 foot container?
David Aladdin: Well I try to keep it under 6 months you know the long-term storage so.
Dan Meadors: You are ordering about 6 months of product at a time which is very good because you are getting a discount by ordering but what we do we are ordering 30 days of inventory that’s like our cashflow is really good like you spend thousands of dollars on day one and about 30 days late we have about 1300 bucks, we spend 1300 bucks, next time we have 1.3 times total times that 1300. That’s how our cashflow model works, that’s how, every dollar we inject we tend to multiply that by 1.3 once a month.
David Aladdin: So, the cashflow increases lot faster than the . . . then technically private label, if my velocity has got too many units and I am not selling as fast as I hoped they would.
Dan Meadors: That’s the strength of the private label like you build your brand, that’s what you said, a very dedicated brand that’s awesome. It’s also a lot of work like whenever we come under a product we make minor changes, minor adjustments and then.
David Aladdin: You guys had to label each product and then send.
Dan Meadors: We have to label like anything that’s grocery food, health and personal care kind of stuff but now you know you don’t need a label because let’s suppose you got a complain and we get this asked all the time its a very common questions like hey you are like the only people we ever heard suggest co-mingling like let’s just say we get a complain, all of our invoices are direct from that manufacturer so like my product cannot be possibly more real like our invoices are perfect so it saves us about 8cents per item to not have to label.
David Aladdin: Do you guys provide the commercial invoices to Amazon before you starting selling.
Dan Meadors: Any time we get a complaint, it’s like you know as well I know when you sell the product, you get customer service, like they hated it and it’s great for them to say the product was counterfeit or whatever from them to send them back to Amazon. So you are going to get a complain like that occasionally but whenever we get those complaints, we address them within like 2 seconds, go get the invoice which is electronically stored invoice and send them to Amazon like ok we understand.
David Aladdin: I think you guys have an awesome SOP setup.
Dan Meadors: Yeah, we do, that was our big focus and we assumed it’s going to pay a lot of demands in 2017.
David Aladdin: Awesome it’s been a pleasure to speaking with you, it’s awesome having you on the show, and you have shared a lot golden nuggets there. Thanks for coming to the show David Aladdin, Dan Meadors. Out.
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