Here’s How To Lower Your Product Cost By Up to 10%

Most drop-shippers start off by fulfilling the orders by placing them on AliExpress. As they progress with the journey and are able to do larger volumes, they use tools like Oberlo or Dropified for auto order placement on AliExpress.

Although we have been working with a private supplier for a few years now, we were able to reduce our product cost by a significant percentage while we placed orders via AliExpress.

AliExpress has an affiliate program that you can sign up for using AdmitAd. Once you’re in the program, you’ll get an affiliate code that you’d need to pass on to Oberlo or Dropified by contacting support.

By doing so, on each order that you’ll place using Oberlo or Dropified, your affiliate cookie will be dropped earning you up-to 10% cashback on your COGS (cost of goods sold).

At average, we have received 7% cashback. Since product is usually 33% of your gross revenue, you can increase 2-3% profit margins which are significant in an e-commerce business.

Finding Opportunities in a Recession

As an entrepreneur, it’s very important to stay calm even when the world is breaking apart. Most of the time, when there is a world changing event like COVID-19, people’s consumption behavior change. They buy different things compared with their previous spending habits.

While doing product research for our E-Commerce holding company, I got to know that Hair Clippers was one of the best selling products while China was on lockdown because of COVID-19. Who would’ve thought that people would buy Hair Clippers when hundreds are dying because of an extremely deadly virus.

But when barbershops are closed, you still gotta cut yours and your children’s hair. 3 of the fastest growing Chinese companies from January to March are companies which are either manufacturing Hair Clippers or are leading retailers.

Another great example of this trend is blankets, hand warmers and mini electric heaters. Due to control measures of COVID-19, apartment buildings turn off heating and you have to open windows for fresh air. However, temperature in many parts of the world is still too cold. China’s leading e-commerce marketplace Pinduoduo reported that sales of blankets and hard warmers saw 165% increase during the lockdown.

When you find calm in chaos, you can find opportunities like these and benefit from them. Insights like these coupled with lethal digital marketing can create new companies which capitalize on new purchasing behaviors.

This is a guest post by Socialoholic’s co-founder @SaadBassi

There Must Be Something That’s Recession Proof Right Now?

COVID-19 has disrupted businesses of all types across the world. I have already written about the turmoil that markets are in. I’ve also mentioned that our business was largely affected too. In fact, our business was affected before most other businesses when COVID-19 was only limited to China. All this while I’ve been thinking what could be the right thing to do during this tough time.

I thought about software businesses, which may also be struggling, but far less than other kind of businesses. In fact there are some software businesses that are doing better than they have ever done before; Zoom for example. As S&P500 index goes down as much as 30%, the stock price for Zoom is up by 30% as more and more people resort to work from home.

You may have also read that Amazon is hiring as many as 100,000 people to fulfill the customer demand. So Amazon doesn’t seem to be doing too bad either as people resort to online shopping to follow social distancing.

The more you read about the bad news on Twitter, Facebook or wherever you get your news from, the more opportunities are presented to you. In fact, when the world was functioning on full-throttle, it was tough to find opportunities because every industry was so competitive. Now, opportunities present themselves to you.

For example, you may have read that in many parts of the world, everything has been closed except for pharmacies, groceries and food deliveries. This is an obvious proof that if you could deliver medicines, essentials or food, you might be doing better than others. But what’s more obvious is that if there was a delivery version available of everything else that’s on a complete shutdown, that could be an even better opportunity.

If people are locked in their houses, they might need more than food or medicines. They certainly need video conferencing (zoom) to continue to work from home. They need Netflix, obviously. They probably also need to workout, right? Probably other things to keep themselves entertained or busy.

Because people need to still workout, we’ve launched our “workout from home” brand in the last couple of days. We’ve seen initial demand for it, and plan to scale it in the coming weeks. There’s a big e-commerce opportunity right now and I encourage that you seize it.

Moreover, Shopify is giving away 90 days free trial instead of the regular 14-days to help small businesses stay afloat. So what are you waiting for? This could be the time to kick-start your e-commerce journey.

Identifying The Optimal Manual Bid For Your Ads

I like to scale my Facebook ad campaigns with manual bids. One of the the tough decisions is to identify what is the optimal bid with regards to the best combination of number of sales and profit per sale. In short, getting the best return on ad spend (ROAS).

One manual way that I’ve used in the past is to start my ads by placing a bid that would result in 1.00 ROAS. For example, if the cost of goods sold is $10 and I’m selling the goods for $30, I’d start by placing a manual bid of $20. What this translates into is that I’m willing to break-even to initiate the learning phase for the ad-set.

Then I reduce this bid by 10% everyday until my ROAS keeps getting better and stop when the spend starts going down. This has helped me identify the right manual bid in the past. But there’s one drawback and that is the auctions change everyday and I only run the top down bid-identifying strategy once. So my manual bid may not be the most optimal manual bid everyday in the future.

However, since the launch of campaign budget optimization (CBO), there’s a simple solution to this problem. You can create multiple ad-sets with different manual bids and place them in a CBO. So if you’re selling that $10 product for $30, you can may be create 5 ad-sets in a CBO with a bid of $13, $14, $15, $16 and $17. The CBO will automatically choose the ad-set that’s likely to get the best results and each day a different ad-set with a different bidding may be getting the sales for you.

Domestic E-Commerce Expected to Post Growth in 2020 Despite COVID-19

E-commerce was one the first affected industries when the COVID-19 hit China. There was a supply-side crisis and many e-commerce stores were unable to source the goods to sell.

Our dropshipping stores came to a stand-still. All other businesses, e-commerce or offline, that relied on China for sourcing or production of goods are in the same boat as us.

But the e-commerce stores that rely on sourcing and shipping products locally or domestically are set to post growth and higher profits. As more and more countries are advising social-distancing, many people around the world are staying at home. This trend will continue to increase in the coming weeks. During the social distancing period, many people are relying on e-commerce services for grocery and other essentials.

Proof of this can be seen by having a look at e-commerce platforms in China tailored to serve the local customers. Carrefour in China has reported 600% growth in sales in Q1 while JD, one of the largest e-commerce services in the world, has reported 200% increase in sales during the first quarter.

2020 is not only going to be a good year for those associated with domestic e-commerce, especially grocery, but such businesses could continue to see more demand beyond the 2020 as well. The current pandemic situation has shown a unique use-case for e-commerce platforms and has proven the need of such businesses in times like these.

Capturing Attention With Cheap Prices & The Art of Upselling

In the summers of 2016, I saw an advertisement for Dewan motors. They are the authorized sellers of BMW CBUs in Pakistan since BMW is not assembled in Pakistan. The 4 million Rs price tag for their 3-series caught my instant attention.

This was cheaper than any other German car brands available in Pakistan for similar compact sedans. Audi A4 prices began from 6 million Rs while Mercedes C-class started from 8 million Rs. BMW obviously caught my attention. So I visited their dealership in Islamabad.

After discussing the car further with the dealership, I realized that my attention has been captured by a cheap price but the dealership has no intention of selling it cheap to me. The 4 million Rs 3-series came with absolutely no features. It was a manual transmission, without climate control, sunroof, or even a cigarette lighter/power outlet. There wasn’t even a paint selection option and the car was offered to be shipped as “Alpine White”. It was a Corolla XLI equivalent of BMW.

The automatic transmission alone was for 1 million Rs. Adding other basics to the car, raised the price up by another million. At this point, I realized that the 4 million price point was advertised only to get me to the dealership. I didn’t buy the car, but I learnt a bit about sales.

In e-commerce, some sellers advertise “Free + Just Pay Shipping” offers. The obvious intention is to sell $1-2 goods for for $0 + $10 for shipping. The same product can also be advertised as $10 with free shipping. However, a split test will prove that the Free+Shipping offers convert better. Because we’ve never been interested in $10 price-point, we’ve never advertised F+S offers, but we do play with this particular area of human psychology in order to get the best value. Let’s explore this further.

If you want to sell something for $25, you could offer it as $25 with free shipping, or for $19.95 with $5 shipping. You’d still get the same $25, but your conversion rates will vary. While there’s no rule of thumb here, but we’ve often seen that it’s better to offer $25 + free shipping to customers in US as they feel entitled to free shipping, and one can advertise $19.95 + $5 shipping to customers outside of US without hampering conversion rates since they are conditioned to pay for shipping from a store that’s not operated in their country.

However, my favorite example is the “Dollar Shave Club”. It was advertised as such that no one should ever need to spend more than a dollar to buy a razor. Except that their cheapest offering which is $1 razor called “humble twin” shipped for $3 including the shipping while they offered free shipping on their other, more expensive blades.

They also called their cheapest blade as “humble”, and others fancier names terming their mid option also members’ favorite. But all of this was only when they had just launched. In the present state, you’re bound to spend 10s of dollars, and that too on an on-going subscription basis. Let’s have a look at what they’re doing today

What is advertised as Dollar Shave Club, now creates a “personalized” basket of goods for you after taking you through a “quiz”. Instead of $1, they attempt to upsell to $42, and bill that every 2 months.

Receiving Ad Delivery Penalty Due to Coronavirus

It should be no surprise to anyone that coronavirus has affected some of the global trade and specifically slowed down the e-commerce industry.

Since we were facing increasing difficulty to source and fulfil our orders, we had stopped advertising some of our stores by end of January where product sourcing had become difficult.

But even though we had stopped the ads, there were still shipping delays for the orders that we had already received. By last week, after a three week break, we had made alternate arrangements for our product sourcing and resumed partial advertising operations for the affected stores. However, today we received an advertising delivery penalization. This has caused us to stop ad-ops one more time.

Although our delivery rates received poor reviews and for obvious reasons, I’m still relieved that nearly 100% of the customers were happy with the product quality.

In the end, I’m not just an e-commerce seller, but many times also an e-commerce buyer. Since I expect to receive a certain quality of service as a buyer, I need to ensure the same as a seller too and when I fall short, with or without coronavirus, I’m not proud of it.

What I Absolutely Hate About Dropshipping

Although dropshiping is just a fulfilment method and there’s nothing wrong with this fulfilment method given that there is a good process in place. But the dropshipping that I commonly refer to on this blog has some shortcomings. I’m going to list a few below.

When you’re fulfilling orders only and only from China, and shipping across the globe, there will be delays despite using e-packet only shipping method. Delays result in angry customers and angry customers aren’t repeat buyers. It’s more challenging to have repeat customers, subscriptions, or higher lifetime value if you’ve 1 fullfilment center in China responsible for your global shipping.

I dislike this about dropshipping and my team does everything in their power to resolve this as much as possible. This can be resolved to some extent using 3PLs once you have a proven product. Like I said, I dislike this but I wouldn’t go so far to say that I hate this about dropshipping.

What I absolutely hate about dropshipping is that there are many many stores that use the same or similar creatives, copywriting, landing pages and scam customers in the end. The customers, who are often very naive, can not even differentiate between two or more stores running ads for 1 identical product.

Moreover, most customers can not understand that they were scammed by someone else. Our support inbox is often full of queries about orders that the customers never placed with us. These are the nicer emails. The other types of emails are accusations and abuses also intended for someone else, but sent to us. Our ads on Facebook get flooded by unhappy customers, who also aren’t our customers.

I wouldn’t say Facebook doesn’t do enough. They run surveys targeting the people who bought from Facebook ads and penalize sellers based on the feedback. But such sellers move from one LLC to another, one domain to another, one theme to another, closing everything behind.

In the end honest sellers suffer. Facebook will obviously crack down even harder. The honest sellers will lose their accounts even more. This is what I absolutely hate about dropshipping.

Overlapping Audiences, Competing With Your Own Ads And My Take On This

Yesterday, I wrote about my ad account that got disabled and I concluded by saying the following

And in the super optimist world, I’ll have two ad-accounts burning twice the fuel, delivering twice the sales, making twice the profit. I want to think that this will happen. Because without this kind of optimism, it’s hard to want to run a business

Today when I read my own blog post, I realized that overlapping brigade must hate me right now for saying something so foolish. But I don’t care about overlap as much as many other people.

I hear a lot of people say that this audience will overlap with that audience or that your ads are competing with your other ads and that you’re bidding higher against your own ads etc. I understand. I understand what you’re saying and I understand what you mean. But I am not concerned on the same level as you.

First things first, I mean no disrespect to other marketers. I will also never claim that I am good at what I do. I am always learning. I spend everyday in this industry with an open heart and an open mind with will to learn more than I knew yesterday. I understand that different marketers have different strategies and yet they are able to deliver results. In summary, I think any strategy that brings the results we seek, is the right strategy and that many strategies can co-exist together.

Now off to some of the reasons why I’m comfortable with overlapping and competing with my own ads.

In the past, I’ve had a successful product where we were spending thousands of dollars per day in ads, and were generating tens of thousands in sales. I did everything in my power to scale the ads profitably until I couldn’t anymore without hurting profitability. So I created a second ad account, created 100% duplicate campaigns as my first ad account, and started competing with my own ads.

The end result was that I was able to increase my sales by over 60% and my profits by over 40%. In summary, by competing with my own self, I slightly reduced my margins, and significantly increased the money I took home.

Now I don’t know about you, but I prefer focusing on the actual dollars I take home, and while the margin percentage remains the significant focus of my business, it isn’t what I’m actually focusing on at the end of the day.

There are many occasions when simply raising the budget will cost you much higher CPA than creating a duplicate copy of your campaign and duplicating budget like that. Of course, you’re overlapping and competing with your own ads, but if it works, then why not?

In addition, not many people know this but Facebook sets CPM penalization not just for ad-accounts, but even for business managers based on the reports it receives from the users about your ads. In this case, running identical campaigns from multiple ad accounts or even different business managers will generate significantly different results.

Furthermore, my attitude towards overlapping and self-competition is also lenient because we like to scale fast. If we won’t scale, someone else will. If we won’t compete with our own ads, someone else will compete with our ads. This is how we like our marketing at Socialoholic.

Recycled Clothes, Landa, And How Large Is The Industry

I learnt something unique in the past few weeks. The size of the recycled clothing industry is mind-boggling and Pakistan get’s the lion’s share of this market.

Zari originally introduced this to us, but my curiosity was further fueled by my long-time friend Saad who filled me in with complete details. I’m left speechless by the sheer size of this industry.

Since 80 billion pieces of clothing are produced every year, more than 10 times the number of human beings in the world, it is obvious that every year there’s a lot of clothing waste. Since I buy roughly 5 pieces of clothes and hope them to last 5 years, I must admit I was shocked with the amount of production and could obviously imagine the wastage. But what happens to all this wastage? It’s sent to emerging economies like Pakistan for nearly free.

The west gets rid of their “waste” instead of using it to fill lands, or decompose in environmentally hazardous manner. Pakistan then puts a new soul in what is termed as a waste.

This wastage that comes to Pakistan is approximately about 1.5 billion pieces per year. This is 125 million pieces per month or 12.5 crore pieces of clothing.

After sorting, nearly 50% of this clothing is marked unfit for wearing and eventually goes into fiber extraction. The other half, which roughly comes down to 60 million pieces of fashion, are restored and made fit for wearing. But what surprised me the most is this fun part; a large chunk of what is restored as fit for wearing is then exported out of Pakistan.

Now I’ve given you the size of industry in terms of number of units, but not in terms of revenue. Pakistan as a country generates nearly $200 million out of export proceeds from these products.

Mind boggling, isn’t it?

Thanks Zari and Saad for the input.