1 00:00:04,110 --> 00:00:06,450 Sean Aylmer: Welcome to the Fear and Greed Business Interview. I'm Sean 2 00:00:06,450 --> 00:00:09,090 Sean Aylmer: Aylmer. We're coming into the busiest time of the year 3 00:00:09,090 --> 00:00:12,300 Sean Aylmer: for retailers as they gear up for Christmas and Boxing 4 00:00:12,300 --> 00:00:15,329 Sean Aylmer: Day sales. But in recent years, we've seen November's Black 5 00:00:15,330 --> 00:00:19,590 Sean Aylmer: Friday and Cyber Monday sales starting to outsell that Christmas 6 00:00:19,590 --> 00:00:23,430 Sean Aylmer: period. It sounds great for plenty in business, but what 7 00:00:23,460 --> 00:00:26,700 Sean Aylmer: if they're becoming overly reliant on Cyber Week for their 8 00:00:26,700 --> 00:00:30,360 Sean Aylmer: annual sales? Paul Waddy is an eCommerce leader and strategic 9 00:00:30,360 --> 00:00:33,749 Sean Aylmer: advisor to brands selling online. He's the founder of learnecommerce. 10 00:00:34,830 --> 00:00:38,820 Sean Aylmer: com, learnecommerce. com. He says it concerns him just how 11 00:00:38,820 --> 00:00:41,400 Sean Aylmer: many online retailers are going through most of the year 12 00:00:41,760 --> 00:00:44,880 Sean Aylmer: making not too much profit, and then relying on that 13 00:00:44,880 --> 00:00:47,638 Sean Aylmer: November, December period to pay all the bills. Paul, welcome 14 00:00:47,639 --> 00:00:48,420 Sean Aylmer: to Fear and Greed. 15 00:00:48,870 --> 00:00:49,979 Paul Waddy: Sean, thanks for having me. 16 00:00:50,219 --> 00:00:52,799 Sean Aylmer: Just give us the big picture first. Right now as 17 00:00:52,799 --> 00:00:56,370 Sean Aylmer: it stands, how important has Black Friday and Cyber Monday 18 00:00:56,580 --> 00:01:00,750 Sean Aylmer: become, and then what's that Christmas period? How important is that? 19 00:01:01,500 --> 00:01:05,639 Paul Waddy: Short answer is too important. So I think this Black 20 00:01:05,639 --> 00:01:09,780 Paul Waddy: Friday, Cyber Monday, cyber period now seems to go for 21 00:01:09,780 --> 00:01:14,160 Paul Waddy: weeks has come on the back of this typically US 22 00:01:14,160 --> 00:01:18,060 Paul Waddy: Thanksgiving sales. Aussies have jumped on board, no doubt. So 23 00:01:18,060 --> 00:01:22,650 Paul Waddy: November revenue in retail is now considerably bigger than December. 24 00:01:22,650 --> 00:01:26,850 Paul Waddy: So November is the biggest retail month of the year, 25 00:01:27,509 --> 00:01:29,700 Paul Waddy: which is unheard of a decade ago. It's always December. 26 00:01:29,699 --> 00:01:31,979 Sean Aylmer: It's happened so quickly. 27 00:01:32,190 --> 00:01:34,800 Paul Waddy: It's happened so quickly. I mean, I didn't even know 28 00:01:34,800 --> 00:01:39,690 Paul Waddy: about this five or six years ago, but we've embraced 29 00:01:39,690 --> 00:01:42,450 Paul Waddy: it. When I say we, I mean well both online 30 00:01:42,450 --> 00:01:47,069 Paul Waddy: shoppers and online retailers, and that's fine. My concern is 31 00:01:47,069 --> 00:01:50,610 Paul Waddy: just that it's sort of this holy grail and it 32 00:01:50,610 --> 00:01:52,170 Paul Waddy: can be a bit of a false profit. You're sort 33 00:01:52,170 --> 00:01:55,230 Paul Waddy: of waiting, waiting to make all your money in November, 34 00:01:55,560 --> 00:01:58,110 Paul Waddy: and obviously you're going on sale, so your margins are 35 00:01:58,110 --> 00:02:02,820 Paul Waddy: under pressure. My concern is that good business operations and 36 00:02:02,820 --> 00:02:05,549 Paul Waddy: business metrics have been largely forgotten for the rest of 37 00:02:05,549 --> 00:02:09,270 Paul Waddy: the year. So I'm a bit worried about this overdependence 38 00:02:09,270 --> 00:02:12,960 Paul Waddy: on the period, and maybe I'm getting old, but I 39 00:02:12,960 --> 00:02:16,619 Paul Waddy: call it the most unexciting part of the retail calendar 40 00:02:16,620 --> 00:02:19,770 Paul Waddy: because I think people are way too focused on this 41 00:02:19,770 --> 00:02:23,639 Paul Waddy: big discounting month, and we don't really love discounting right? 42 00:02:23,639 --> 00:02:24,720 Paul Waddy: Hurts our margins. 43 00:02:25,080 --> 00:02:28,858 Sean Aylmer: Okay. So what about how's it compared to that Christmas 44 00:02:28,860 --> 00:02:33,630 Sean Aylmer: period in the Boxing Day sales and early January? That 45 00:02:33,630 --> 00:02:36,809 Sean Aylmer: period must be bigger than, I mean, I agree that 46 00:02:36,809 --> 00:02:39,990 Sean Aylmer: it's becoming weeks, not days, but that period is bigger. 47 00:02:39,990 --> 00:02:40,259 Sean Aylmer: Is it? 48 00:02:40,590 --> 00:02:42,239 Paul Waddy: Yeah, look, I mean, I work with a lot of 49 00:02:42,360 --> 00:02:45,480 Paul Waddy: online retailers from anywhere from kind of 5 million a 50 00:02:45,480 --> 00:02:48,600 Paul Waddy: year to a $ 200 million a year in revenue. I would 51 00:02:48,600 --> 00:02:53,639 Paul Waddy: say on average, November sales are at least 50% bigger 52 00:02:53,639 --> 00:02:57,149 Paul Waddy: than the month of December. So even just with that 53 00:02:57,240 --> 00:02:59,729 Paul Waddy: week, which has become a fortnight, and it is a 54 00:02:59,730 --> 00:03:03,149 Paul Waddy: little bit sad, but Boxing Day sales, they're not real. 55 00:03:03,870 --> 00:03:06,030 Paul Waddy: A bit of a novelty to go into stores. But 56 00:03:06,120 --> 00:03:09,690 Paul Waddy: on the online retail calendar, they're getting smaller and smaller 57 00:03:09,690 --> 00:03:13,500 Paul Waddy: because I think people are pretty much overspent in November. 58 00:03:13,830 --> 00:03:17,099 Paul Waddy: So there's no question like these big November sales are 59 00:03:17,100 --> 00:03:20,820 Paul Waddy: pulling some of the revenue away from December, and definitely 60 00:03:20,820 --> 00:03:23,940 Paul Waddy: January. January has become a really, really soft month in 61 00:03:23,940 --> 00:03:27,660 Paul Waddy: terms of particularly online retail, but it's just November is 62 00:03:27,660 --> 00:03:29,220 Paul Waddy: straight ahead of the rest at the moment. 63 00:03:29,610 --> 00:03:31,920 Sean Aylmer: Okay, so if I'm an online retailer and I do 64 00:03:31,950 --> 00:03:35,789 Sean Aylmer: 10 million, 20 million turnover a year, so it's a decent size 65 00:03:36,240 --> 00:03:40,710 Sean Aylmer: and I am overly reliant on November 1st and then December, 66 00:03:41,040 --> 00:03:43,440 Sean Aylmer: what would you recommend? How should I spread it out 67 00:03:43,650 --> 00:03:44,520 Sean Aylmer: throughout the year? 68 00:03:45,059 --> 00:03:48,540 Paul Waddy: Well, again, I just today was on a call with 69 00:03:48,540 --> 00:03:51,059 Paul Waddy: a retailer who's planning to do four and a half 70 00:03:51,059 --> 00:03:54,840 Paul Waddy: million dollars in revenue in November, and I was sort 71 00:03:54,840 --> 00:03:57,630 Paul Waddy: of a little bit nervous because I know that they've 72 00:03:57,630 --> 00:04:01,320 Paul Waddy: lost money basically up until this point. It's quite a 73 00:04:01,320 --> 00:04:04,650 Paul Waddy: stressful moment because you're putting all your eggs in one 74 00:04:04,650 --> 00:04:08,910 Paul Waddy: basket. And my idea of good business, and that's why 75 00:04:08,910 --> 00:04:12,209 Paul Waddy: I am in business, is that owning a business should 76 00:04:12,209 --> 00:04:15,480 Paul Waddy: improve your life. I'm not sure that making profit in 77 00:04:15,480 --> 00:04:18,029 Paul Waddy: one month of the year is really improving your life. 78 00:04:18,029 --> 00:04:21,029 Paul Waddy: I actually think that is making your life stressful. So 79 00:04:21,029 --> 00:04:24,960 Paul Waddy: for me, I much prefer those good stable businesses that 80 00:04:25,020 --> 00:04:28,590 Paul Waddy: you're pulling a profit from January through to December. So 81 00:04:28,920 --> 00:04:32,760 Paul Waddy: the advice that I would give to online retailers is 82 00:04:33,450 --> 00:04:36,180 Paul Waddy: any mug can make sales in November. If I throw 83 00:04:36,180 --> 00:04:41,010 Paul Waddy: up a 30% discount code to my customers, great, I'll 84 00:04:41,010 --> 00:04:43,529 Paul Waddy: make plenty of money. But that's really going to impact 85 00:04:43,529 --> 00:04:45,839 Paul Waddy: your bottom line. So you've got to remember to focus 86 00:04:45,839 --> 00:04:48,149 Paul Waddy: on your unit economics. It's not just about filling my 87 00:04:48,150 --> 00:04:50,550 Paul Waddy: bank account. You've got to remember you actually paid for 88 00:04:50,550 --> 00:04:53,279 Paul Waddy: that stock at some point. You've now discounted it and 89 00:04:53,279 --> 00:04:57,480 Paul Waddy: you're selling it. So I would much prefer that retailers 90 00:04:57,480 --> 00:05:02,279 Paul Waddy: think about good business practices from January through to December. 91 00:05:02,460 --> 00:05:04,800 Paul Waddy: Does that mean I think you shouldn't discount in November? 92 00:05:04,889 --> 00:05:08,490 Paul Waddy: No, but I think you should discount as part of 93 00:05:08,490 --> 00:05:11,400 Paul Waddy: your strategy to improve your balance sheet to clear old 94 00:05:11,400 --> 00:05:16,109 Paul Waddy: stock, not as the primary strategy, because any retailer, I 95 00:05:16,110 --> 00:05:20,250 Paul Waddy: think with some exceptions, but any retailer that leads with the " 96 00:05:20,549 --> 00:05:23,308 Paul Waddy: I'm cheaper than everyone else" strategy is really playing a 97 00:05:23,309 --> 00:05:27,779 Paul Waddy: stressful game against some really big, big retailers. And I 98 00:05:27,779 --> 00:05:29,969 Paul Waddy: don't think we want to be in that price war 99 00:05:30,060 --> 00:05:31,080 Paul Waddy: really as retailers. 100 00:05:31,440 --> 00:05:33,300 Sean Aylmer: Stay with me, Paul. We'll be back in a minute. 101 00:05:39,450 --> 00:05:42,600 Sean Aylmer: My guest today is Paul Waddy, e- commerce leader and strategic 102 00:05:42,630 --> 00:05:47,760 Sean Aylmer: brand advisor. Okay, so I'm this fictitious retailer that I 103 00:05:47,760 --> 00:05:51,359 Sean Aylmer: am, and I'm turning over at however many million a 104 00:05:51,360 --> 00:05:54,719 Sean Aylmer: year. What's your advice then to get me into a 105 00:05:54,719 --> 00:05:57,928 Sean Aylmer: pattern of selling in January and February and March and 106 00:05:57,928 --> 00:06:01,110 Sean Aylmer: April? Are there just a few really basic rules around e- 107 00:06:01,110 --> 00:06:02,460 Sean Aylmer: commerce that I need to follow? 108 00:06:03,029 --> 00:06:05,400 Paul Waddy: Yeah, well, I've got a rule that I developed. It's 109 00:06:05,400 --> 00:06:09,510 Paul Waddy: called my 50/30/ 20 rule. And the reason that I built 110 00:06:09,510 --> 00:06:11,639 Paul Waddy: it was because so many people got into online retail 111 00:06:11,639 --> 00:06:14,249 Paul Waddy: from all different walks of life, including myself. No one 112 00:06:14,250 --> 00:06:17,189 Paul Waddy: really has a background in e- commerce. They don't teach 113 00:06:17,190 --> 00:06:19,140 Paul Waddy: it at school. They don't teach it at uni. So 114 00:06:19,440 --> 00:06:22,470 Paul Waddy: I found a lot of online retailers were exploding, like 115 00:06:22,470 --> 00:06:25,170 Paul Waddy: got to $ 10 million a year, and you would've seen 116 00:06:25,170 --> 00:06:28,110 Paul Waddy: it over the last year, collapse after collapse, after collapse. 117 00:06:28,589 --> 00:06:31,650 Paul Waddy: And I created this rule called the 50/30/ 20 rule. So in 118 00:06:31,650 --> 00:06:34,680 Paul Waddy: online retail, and probably in maybe to a lesser extent 119 00:06:34,680 --> 00:06:37,589 Paul Waddy: in bricks and mortar retail, you need a 50% gross 120 00:06:37,589 --> 00:06:41,910 Paul Waddy: margin at all times minimum. You need to be focusing 121 00:06:41,910 --> 00:06:45,928 Paul Waddy: on spending 30% of your monthly revenue in your operating 122 00:06:45,928 --> 00:06:48,029 Paul Waddy: expenses. So you've got to stay under 30% of your 123 00:06:48,029 --> 00:06:50,609 Paul Waddy: revenue in running your business, and that leaves you with 124 00:06:50,610 --> 00:06:55,080 Paul Waddy: 50 minus 30 equals 20. That leaves you with a 20% net 125 00:06:55,080 --> 00:06:58,710 Paul Waddy: profit. And so that's a very basic framework that I 126 00:06:58,710 --> 00:07:02,610 Paul Waddy: think online retailers can stick to in their worst months. 127 00:07:02,849 --> 00:07:04,890 Paul Waddy: So you've got to be hitting those numbers in your 128 00:07:05,190 --> 00:07:08,878 Paul Waddy: quiet Januarys and so on. And if you are achieving 129 00:07:08,940 --> 00:07:13,049 Paul Waddy: that 50/30/20 rule in your quiet months, you are setting 130 00:07:13,049 --> 00:07:16,980 Paul Waddy: yourself up for massive success. So just do great things, 131 00:07:16,980 --> 00:07:19,380 Paul Waddy: have a great brand, great product, but stay in that 132 00:07:19,380 --> 00:07:23,010 Paul Waddy: 50% gross profit, 30% operating expenses that'll give you that 133 00:07:23,010 --> 00:07:25,950 Paul Waddy: 20% net profit that you really need to improve your 134 00:07:25,950 --> 00:07:27,240 Paul Waddy: life as a business owner I think. 135 00:07:27,780 --> 00:07:30,059 Sean Aylmer: How do you cut through all the noise in e- 136 00:07:30,059 --> 00:07:32,940 Sean Aylmer: commerce? If I'm an operator, how do I get my 137 00:07:32,940 --> 00:07:33,900 Sean Aylmer: message out there? 138 00:07:34,980 --> 00:07:37,470 Paul Waddy: Never as hard as it is right now, Sean, because 139 00:07:37,830 --> 00:07:41,190 Paul Waddy: everybody's doing it and people think it's as easy as 140 00:07:41,190 --> 00:07:43,889 Paul Waddy: throwing money at Facebook and Facebook ads and so on, 141 00:07:43,889 --> 00:07:46,019 Paul Waddy: and it's really not. I think there's actually an over 142 00:07:46,020 --> 00:07:49,170 Paul Waddy: dependency on Facebook ads. It's seen as this kind of 143 00:07:49,170 --> 00:07:52,710 Paul Waddy: salvation that is getting harder and harder. I think that 144 00:07:52,890 --> 00:07:56,820 Paul Waddy: you need to aim for 50% of your revenue and 145 00:07:56,820 --> 00:08:00,569 Paul Waddy: your traffic to your site coming from organic sources, so 146 00:08:00,570 --> 00:08:03,660 Paul Waddy: by organic, I mean free. So way too many brands 147 00:08:03,660 --> 00:08:06,750 Paul Waddy: thinking about, oh, Facebook ads, Facebook ads, Google Ads, SEO, 148 00:08:07,320 --> 00:08:09,960 Paul Waddy: you've got to think about your free channels more than 149 00:08:09,960 --> 00:08:12,690 Paul Waddy: your paid channels. So you think about the best brands 150 00:08:12,690 --> 00:08:15,540 Paul Waddy: that I work with, like your Budgy Smugglers household name, 151 00:08:16,110 --> 00:08:19,259 Paul Waddy: they spend less than 10% of their revenue on ads. 152 00:08:19,590 --> 00:08:21,420 Paul Waddy: And people don't believe me when I say that because 153 00:08:21,570 --> 00:08:24,539 Paul Waddy: a lot of brands spending 20, 30% or more, but they 154 00:08:24,540 --> 00:08:27,300 Paul Waddy: don't have to because they've got such a great organic 155 00:08:27,300 --> 00:08:30,090 Paul Waddy: brand. And if you look at their social media, they're 156 00:08:30,090 --> 00:08:31,980 Paul Waddy: funny. One of their pillars is, " We're funny and we're 157 00:08:31,980 --> 00:08:35,220 Paul Waddy: cheeky." So you've got to lean into social media and 158 00:08:35,580 --> 00:08:38,099 Paul Waddy: find your pillar. Find what can you do, Sean, that's 159 00:08:38,099 --> 00:08:40,679 Paul Waddy: better than everybody else. And for me, I say, well, 160 00:08:40,679 --> 00:08:42,690 Paul Waddy: I'm going to give out e- commerce advice, and people 161 00:08:42,750 --> 00:08:45,480 Paul Waddy: resonate and they follow that. So you've got to find what you're 162 00:08:45,480 --> 00:08:48,208 Paul Waddy: really good at and use as many of the social 163 00:08:48,210 --> 00:08:51,749 Paul Waddy: channels as you can to grow an organic or free 164 00:08:51,990 --> 00:08:54,240 Paul Waddy: following. They will pay you back. And if you can 165 00:08:54,270 --> 00:08:58,259 Paul Waddy: find the people first and the product second, rather than saying, " 166 00:08:58,260 --> 00:08:59,910 Paul Waddy: Oh, I've got a product," and just flogging it off 167 00:08:59,910 --> 00:09:02,670 Paul Waddy: to as many people as possible. Build the people, build 168 00:09:02,670 --> 00:09:06,300 Paul Waddy: the community through your organic social media channels first, and 169 00:09:06,300 --> 00:09:08,429 Paul Waddy: then introduce the product and the revenue comes later. 170 00:09:09,330 --> 00:09:12,838 Sean Aylmer: Just a final question, Paul, where's e- commerce up to? 171 00:09:12,870 --> 00:09:17,429 Sean Aylmer: Obviously COVID was spectacularly good for e- commerce. It has 172 00:09:17,429 --> 00:09:20,580 Sean Aylmer: come off the boil somewhat, but no one thinks it's 173 00:09:20,580 --> 00:09:23,160 Sean Aylmer: ever going back to where it was. Will it just 174 00:09:23,160 --> 00:09:26,910 Sean Aylmer: continue to grow and dominate retail spend more generally? 175 00:09:27,660 --> 00:09:29,999 Paul Waddy: Well look. So I wrote a book called Shopify for 176 00:09:30,000 --> 00:09:33,089 Paul Waddy: Dummies and Selling Online for Dummies, and last week my 177 00:09:33,089 --> 00:09:36,299 Paul Waddy: book went number one in Amazon in the US last week. 178 00:09:36,330 --> 00:09:36,480 Sean Aylmer: Wow. 179 00:09:36,510 --> 00:09:39,330 Paul Waddy: There has never been more interest. Yeah, it's a little 180 00:09:39,330 --> 00:09:42,780 Paul Waddy: bit harder than it was. Where are we at now? E- 181 00:09:42,780 --> 00:09:46,440 Paul Waddy: commerce is probably at about 20% of total retail. So 182 00:09:46,770 --> 00:09:50,160 Paul Waddy: Sean, in my opinion, in 10 years it'll be 50/50 183 00:09:50,160 --> 00:09:53,309 Paul Waddy: with traditional retail. Now how I can tell you that 184 00:09:53,309 --> 00:09:55,830 Paul Waddy: is I've got three daughters under the age of five. 185 00:09:56,250 --> 00:09:58,950 Paul Waddy: They can use an iPad better than I can. So 186 00:09:59,280 --> 00:10:02,578 Paul Waddy: evolution when I'm old and gray, although I'm already gray, 187 00:10:02,580 --> 00:10:04,828 Paul Waddy: but when we get older and we move on, it 188 00:10:04,830 --> 00:10:07,860 Paul Waddy: is inconceivable for me to think that the younger generation 189 00:10:07,860 --> 00:10:10,139 Paul Waddy: won't come through and be more digitally savvy than we 190 00:10:10,139 --> 00:10:13,380 Paul Waddy: are. So evolution tells me that, as weird as it 191 00:10:13,380 --> 00:10:16,740 Paul Waddy: sounds, we're still pioneers in e- commerce. You could start 192 00:10:16,740 --> 00:10:20,699 Paul Waddy: an online store this week and in 20 years have 193 00:10:20,700 --> 00:10:23,968 Paul Waddy: created a legacy brand and still be considered a pioneer. 194 00:10:24,210 --> 00:10:26,340 Paul Waddy: So it's bizarre to say it Sean, but we're still 195 00:10:26,340 --> 00:10:28,739 Paul Waddy: in its absolute infancy. There's a long way to go 196 00:10:28,740 --> 00:10:29,640 Paul Waddy: in the scheme of things. 197 00:10:29,969 --> 00:10:31,830 Sean Aylmer: Paul, thank you for talking to Fear and Greed. 198 00:10:32,220 --> 00:10:33,179 Paul Waddy: Thanks for having me, Sean. 199 00:10:33,600 --> 00:10:37,530 Sean Aylmer: That was Paul Waddy, e- commerce leader and strategic brand advisor. 200 00:10:37,830 --> 00:10:42,689 Sean Aylmer: He's founder of the website, learnecommerce. com. This is the 201 00:10:42,690 --> 00:10:45,000 Sean Aylmer: Fear and Greed Business Interview. Join us every morning for 202 00:10:45,000 --> 00:10:47,639 Sean Aylmer: the full episode of Fear and Greed, Australia's best business 203 00:10:47,639 --> 00:10:50,160 Sean Aylmer: podcast. I'm Sean Aylmer. Enjoy your day.