Swim with your arms and kick with your legs

One of the key differences between BuyReply and Lind Golf is that BuyReply’s business model gives us control over our inbound and outbound sale efforts. Unlike Lind Golf, BuyReply does not rely only on inbound activity. We can also generate outbound activity at a pace of our choosing.

When selling products online via an eCommerce model, much of your effort is focussed on generating inbound traffic. That means setting up Google Ads, building an email database so that you can market to existing customers (who were acquired via inbound strategies) and running ads on Facebook and social media platforms. Generating inbound traffic is expensive and risky. You need to invest a lot to get results.

The problem with this, is that once things are humming, it is difficult to do anything that has a material impact on your business. You can’t close a massive deal which takes things to a whole new level in terms of sales or revenue. You can’t do this because doing deals is an outbound activity. You need to wait for somebody to visit your site, and hope that they are the 1% that convert.

Traditional and online retail is mostly an inbound game. The way to grow these kinds of business is to try and best convert the traffic that you get by merchandising and pricing your offering well, delivering excellent customer service and offering a great user experience. You can grow your business by growing your product range across categories, therefore increasing your total addressable market, however that is often an expensive and timely exercise. Bricks and mortar retailers generate their inbound traffic by paying high rent in high-street locations.

What we are doing different this time around, is building a product and business model where we can drive outbound sales as well as inbound traffic. We still have the same inbound marketing strategies in place, such as Google Adwords, PR, social and so forth, however because we are selling a service we are able to identify who would want to use our product, and contact them directly.

Running a business that solely depends on inbound sales is like swimming with your arms only. You are only utilising half of your potential. What you really want to do is swim with your arms and kick with your legs at the same time.

That is how it felt at Lind Golf as we relied 100% on inbound sales. We considered opening a wholesale division however our low Internet/direct pricing was working against us because stores had their own home brands and our range was not priced at a premium price point so there was no room for a wholesale margin. We were swimming with our arms and frustrated that we couldn’t kick with our legs.

With BuyReply we are able to segment our market, target specific use cases of the platform, contact customers directly and set up meetings. Phone calls are a lot cheaper than Google Ads and you have so much more control. We can see our customers, speak to them, learn from them, address their concerns and make our business (and their businesses) better because of it. Furthermore, BuyReply is much more scalable. We can close a really large customer that could double our business, in a matter of days or weeks, where as closing a single customer at Lind Golf may have ended up in a $300 order. Having direct control over our sales is really exciting coming from an environment where we had fairly little control over sales and scale.

The problem with capitalism

A friend sent me the email below… And it made me think this:

The problem with capitalism is that the people who know how to make money, spend their time making money. The people who don’t know how to make money become politicians. Then they overspend taxes and the country ends up in debt.

Do you agree?

 


Awesome tour of Warren Buffett’s office, by Warren Buffett

The fact that Warren Buffett does not have a computer on his desk says a lot. It means that he is precluded from the distractions and noise that Wall St generates and broadcasts across the web. Being shielded from this would have a lot to do with his ability to think long term – and his concentration span is probably better because of this too. That’s why he can devour annual reports all day. He doesn’t have Twitterrific  refreshing every few seconds!

Interview with Power Retail

Last week I was interviewed by Power Retail about eCommerce, my journey so far and what’s coming next. I was lucky enough to have the interview promoted as a feature article on their site today.

You can read the interview here.

The Coming Era of Flat Earth Pricing

It is not often I post other people’s are articles on this blog. I prefer to write original content.

However this article hit me on two fronts.

  1. Because of its awesome title – it refers to the the book “The world is flat” which is probably one of the best books I’ve ever read. It inspired me to start my first business.
  2. Because it is so true.

It was written by Jon Bird, the CEO of IdeaWorks. I don’t know Jon.
But I know that his thinking is spot on.

http://www.newretailblog.com/the-coming-era-of-flat-earth-pricing/

Enjoy.

Learning from Oink: Execution isn’t everything

Cross posted to Start-up Smart

Kevin Rose had everything going for him. A strong personal brand and network, $1.7 million in funding and a team of super smart people that could probably build any consumer web/mobile concept you threw at them – and build it well.

What they didn’t have was a great idea. They had a social concept without a monetisation strategy. That is a tough gig.

In the midst of all the consumer internet noise, founders are forgetting that business is still about turning a buck. From the outset you have to know how you are going to earn a dollar and that comes down to having a business model that can make money, no matter how good you are at executing on a technical challenge.

Social does not start out as a business model

The major social successes such as Facebook, Twitter, Instagram and Pinterest never started out as business ideas. They were social experiments by and large. Through a combination of vision, timing and luck they attracted users and grew quickly. Then they raised money.

Facebook received its famous $500,000 round from Peter Thiel after Harvard and a number of east coast universities were already using the system. They had hundreds of thousands of users by then.

Oink set out to start a social network by raising funds upfront and hoping they would hit the sweet spot that would result in adoption. It should happen the other way around.

Fail Fast

Kevin pulled the pin three months after the app was launched. Failing fast is all about putting your ego aside and being real with yourself. You have to ask yourself the tough questions. Am I pushing shit uphill? Is this thing worthwhile pursuing over the long term? Am I too late? Can I compete with the established players? Will it make money given the resources I have?

Even better, ask those questions before you start. The answers are usually obvious. Don’t ignore them. Rather wait until you find something that ticks the right boxes; then go for it.

The lesson here is that execution is NOT everything. You still need a goodbusiness idea.

Why you will fail to have a great career

 

Woolies Barcode Scan Virtual Store

I took this pic last week in Circular Quay. This is the kind of thing that we are going to be seeing everywhere soon.

I spoke about in my recent Future of eCommerce post. It’s pretty damn cool – and scary. Retailers must adapt and embrace. You can’t fight this kind of change. Just figure out how to make it work for you.

 

Accepting overseas payments as an Australian Start-up

There has been a bit of hoo-haa around Startmate’s decision to incorporate their latest round of companies as Delaware corporations. It has been said that much of this decision was to do with challenges in accepting payments for services, with part of the blame being placed on the payment infrastructure within Australia.

The truth is that Australia will never be as good as Silicon Valley as a start-up hub. This is a view I share with Niki. I view Australia as a great place to build products (because there is less competition for engineers) and the US as an excellent market to sell your products, and eventually sell your company. I suspect that incorporating in Delaware makes it easier to do the later when the time is right. A US acquirer would much rather acquire a company incorporated in the US than they would acquire a company incorporated in Australia. It’s just easier.

Furthermore, what needs to be understood is that the revenues generated in the US will be bought back to Australia to fund the local development teams who are working on these start-ups. By incorporating in the US, the start-ups are simply removing friction that might be a problem down the track when/if an acquisition opportunity presents itself.

I also believe VC in Australia is a really tough gig. The smart ideas (and entrepreneurs) will always gravitate toward Silicon Valley based funding. The average/smaller/copycat ideas will get Australian money because these ideas are not addressing markets big enough, have already been done or are not being executed well enough, to get the attention of US investors, and if you are  a VC (Australian or otherwise), what is the point of investing in small ideas?

Perhaps there is a market to seed ideas here, but the right businesses should be raising Series A rounds from investors in the US who have the right relationships and networks to scale your business and sell it down the track. This is what Startmate does really well.

Back on the topic of payments, it is very difficult and expensive to settle payments for a US denominated web service from Australia. However it is possible. We’ve figured it out.

Over the last month we spent a lot of time trying to figure out a workable payment model to accept payments in US dollars from US customers with an end game of the funds being settled into an Australian bank account so that we can pay expenses in Australia. One such example is to set up an NAB multi-currency account and accept payments in US dollars via eWay. By doing this you are receiving funds in US dollars in to a US denominated bank account held by an Australian bank. This works, however the costs of opening an NAB multi-currency account are ridiculous – too much for a start-up. NAB multi-currency is expensive.

After a lot of brain storming we eventually figured out how to sell in Australian Dollars, US Dollars, Pounds, Yen, and New Zealand dollars. The solution is to use the US version of PayPal Website Payments Pro.

This enables us to accept credit card payments directly from our website  into PayPal subaccounts denominated in each of the currencies mentioned above. The US version (not the Australian version) of PayPal Website Payments Pro enables you to build a checkout that does not redirect users through a PayPal login flow. The entire flow occurs via your website allowing you to programatically pass credit card details through to PayPal without customers requiring a PayPal account. By doing this you are bypassing the need for bank accounts in multiple currencies and other administrative hassles required to reconcile and maintain these accounts.

For the cost of processing a transaction (around 2.2%) we can have one main PayPal account with subaccounts that are denominated in any currencies that PayPal support. As funds build up in US dollars we can either leave them there, withdraw them to a US bank account, or transfer the funds in the our Australian PayPal account then withdraw these funds to an Australian bank account for free.

Our pricing page will have a drop down menu like Twilio’s pricing page where you can choose your currency. Your subscription and usage charges will then be billed in the currency that you sign up in.

We have therefore managed to architect BuyReply to accept payments in foreign currencies without having to open up overseas bank accounts or incorporate in the US.

Two topical articles

Last month I wrote  a blog post titled “Create your own luck“. My point in this article was that Rocks are finite, but knowledge is not meaning that we must continue skilling ourselves as an economy and country as the resources we have will eventually run out.

This morning I woke up and read a Thomas Friedman article in the New York Times titled “Pass the Books. Hold the Oil.” It drives home a very similar message. I really suggest you read it.

This was my favourite quote:

In sum, says Schleicher, “knowledge and skills have become the global currency of 21st-century economies, but there is no central bank that prints this currency. Everyone has to decide on their own how much they will print.” Sure, it’s great to have oil, gas and diamonds; they can buy jobs. But they’ll weaken your society in the long run unless they’re used to build schools and a culture of lifelong learning. “The thing that will keep you moving forward,” says Schleicher, is always “what you bring to the table yourself.”

On a different topic, I read an article written by Reid Hoffman (founder of LinkedIn) and his team from Greylock Partners in Silicon Valley which was titled “The Credit Card Is The New App Platform“. They describe the Online to Offline trend in uncanny similarity to a recent Lind Ventures post titled “Online2Offline – The Megatrend” which I wrote in Feb. I really believe this is one of the largest opportunities in the marketplace today:

We’re big believers at Greylock in the future of “online to offline” commerce, and we’re seeing a ton of innovation in this space. One of our portfolio companies, CardSpring, announced a major partnership with First Data earlier this week. We’ve invested in several other “online to offline” commerce companies including Coupons.com, Groupon, Shopkick, Swipely, TrialPay and Wrapp. And there are many other companies innovating in the space, including startups like Square, and established companies like Google, American Express and Visa.

For all of the attention focused on online commerce, the market opportunity for “online to offline” commerce is way bigger. Online commerce is now a $200 billion industry, but it’s still small compared to offline transactions. Up to 70% of consumer spending is influenced by Web and mobile research, but over 90% of actual transactions are still conducted in the physical world. Several major industries are motivated to see this new app developer ecosystem take flight. Retail marketers know they can advertise more efficiently if they can actually track and close the redemption loop from online browsing to offline buying.

Greylock has invested in a few companies that operate at the fringe of this trend however as Ron Conway puts it, the largest returns to be had from the online to offline space will be for the companies that are as close to the actual transaction as possible. That means payment processing or facilitating payment processing in the real world by electronic means.