Episode 38: Cash is King

Our show today is titled Cash is King! We discuss the ups and downs of inventory and anticipating your market. When we got started, we relied on affiliate marketing so actually keeping an inventory is new for both of us.

Today, we tell you what guidelines we use for ourselves with inventory. Also, we talk about inventory practices on Amazon, so tune in for some practical tips.

The topics we covered today:

• An update on our shipping troubles
• The 90 Day Rule
• When you can set terms with a manufacturer
• Past issues we’ve seen with inventory
• How to be a good buyer
• How to optimize Amazon’s inventory listings
• Amazon’s holiday storage fees
• The benefits of owning your own warehouse
• Knowing when to liquidate or hang in there
• Why you should do your homework on a product before you order
• The mistakes we’ve made in our inventories

Resources:

Amazon

Stitch Labs

Skubana

If you have any questions or anything you’d like us to discuss on the podcast please go to ecomcrew.com and fill out the contact form. Also we would really appreciate if you would leave us a review on iTunes. Thanks for listening!

Full Audio Transcript

Mike:   This is Mike.

Grant:  And this is Grant.

Mike:   And welcome to episode number 38 of the EcomCrew podcast.  How’s it going today, Grant?

Grant:  It’s going good.  I have quite a bit of luck from the last time I talked about bad luck and now I’ve found out that my order from Tunisia is actually on a boat.  So –

Mike:   Nice.

Grant:  Yeah.  So it’s not in a giant pit somewhere along with the rest of my money so I’m a happy, happy man.  I’m lucky.

Mike:   It’s actually interesting that you mention that.  I just got an email from our freight forwarders because we have four shipments that are in route right now and we get updates on all of them, which is kind of cool.  So we have a ton of stuff showing up here between now and the end of next month and then, really, the end of this month but yeah.  It’s an exciting time when you’ve got four containers of stuff kind of sailing this way.  It’s pretty darn neat.

Grant:  Yeah.  I’ve got two containers on the way and the thing that is aggravating to me: I’ve got one air cargo flight out of Italy and –

Mike:   What?

Grant:  Yeah, yeah, yeah.  I know, I know.  It’s crazy but –

Mike:   Did you fall and hit your head in the shower or something?

Grant:  Nah, there’s a reason for it, which is essentially it’s very fragile kind of stuff but I’ve got an air cargo flight out of there and I think it was around $1,500 to get it air cargo, which is pretty cheap for air cargo.

Mike:   Yeah.

Grant:  It’s only about one pallet.  And I’ve got a container, a full-ass container, coming from Asia for $2,200 so –

Mike:   Exactly.

Grant:  So mind blown.  Just –

Mike:   Yup.

Grant:  It’s so painful.

Mike:   We didn’t plan it this way; we already knew our topic but it goes well into our topic for today, which is cash is king and just keeping track of cash flow and how quickly cash can become an issue in the inventory business.  So, with all that inventory that you have coming and I have coming, it’s definitely a big factor.

Grant:  Oh yeah.  I think everybody that starts buying a new product gets a little bit of fear and a lot of worrying because you’re essentially parking all your money into a solid object and hoping that you can turn it back into more money, let alone turning it into nothing.  Even big companies have to liquidate at the end of the day when something goes wrong.

Mike:   Yup.  So, I mean Grant and I, we chose this topic because we don’t really have a background in cash flow management and it’ll be interesting.  We’re going to kind of talk candidly about what we’ve been doing and our background in this.  And just to give everyone a quick background story of us and why we don’t have to deal with cash flow: I mean we were doing affiliate marketing.  So how much cash is necessary to do affiliate marketing, Grant?

Grant:  I needed to pay for like a hamburger for lunch but other than that, it was pretty much very easy.

Mike:   Yeah.  I called it like money falling from the sky magically.  It was pretty much the way it was.  I mean we would sign up players or customers or whatever and we’d get a check and we’d actually even use the cash accounting method because everything was just so easily attributable.  But with inventory, it’s completely different.  I mean you’re sinking in huge amounts of money and turning it over every 60 days to, you know, sometimes every way, way longer.  I mean I try to target 90 days for rollovers.  What do you target, Grant?

Grant:  I wish everything was 90, and I think that’s the industry standard, which is 90 days, 3 months.  You don’t really want to go over that, and unfortunately, I think everybody eventually has some product that doesn’t.  If you’re very lucky, all your stuff is at under 60 and you’re doing great.  But I think I’ve got some stuff that is just dead weight sitting at 180 days and a lot of that, I just go onto eBay and I try to unload as fast as possible.  What’s your longest stuff that you have?

Mike:   Probably the realistic answer is I don’t even know.  That’s one of the things I’m looking forward to out of Skubana here, is getting a little bit better feel.  I can probably run some reports out of Stitch, but don’t really have a great feel.  I don’t have a report that I can just run and give you that answer, which is bad, right?

Grant:  Mm-hmm.

Mike:   So yeah.  Well, I can tell you, for the things that move quickly, that we do have a pretty good feel for and we target 90 days like absolute most and it really depends on the lead times and some MOQs.  It’s not just a straight black and white answer.  I mean, for instance, if we’re ordering something from North America and it takes 10 to 20 days to get here, the equation’s a little bit different than something we’re ordering from Asia and it takes 45 to 60 days to get here.  So that all kind of factors into it.

Grant:  Right.  And I pretty much count everything from the moment I actually get it landed at my door because that’s really when the count starts happening.  And it would be fair to say your money gets tied up the minute that you wire it out or your vendor gets it, but the reality is you really can’t do anything once you’ve paid the money out and you’re just waiting for your product.  So I think that’ll make people a little bit more sane.  Otherwise, I feel like you’d already start halfway down the path toward the 90-day benchmark by the time your product gets delivered, especially for us, if you’re importing from overseas.

Mike:   Yeah.  I mean I started to actually look at it from the moment I send the wire.  Obviously, not the 90-day marker, but it’s a factor of how long is it going to take because we have to put a deposit down.  So you’re putting 30% deposit down if you’re ordering from overseas and that money’s tied up.  I mean it’s a part of the cash flow equation and so I do factor that in.  And we’ve been getting more sophisticated in how quickly we can turn that, right?  So sometimes we put a deposit down and we’re still doing some final design work and other things that take up more time.  So that’s one thing we’ve been focusing on is – the moment that we send the money to the moment that the product is ready to be delivered is getting that timeframe down.

Grant:  And I know that a lot of the really big sellers can actually get on net terms with the Chinese vendors and, sounds pretty crazy, but it makes sense to the manufacturer when you think about it.  If you’ve got a solid record with them and you can turn inventory and you’ve done maybe 10 orders or whatnot, if you actually approach them and say, “Hey, you know, I’ve moved X amount of your product and it would be a lot easier for me to be able to start moving more, but I’m cash limited.  You just front me –” I’d still pay the 30% deposit so the reality is they can’t really lose a lot of money and they probably are break-even at that point.  I mean I’m sure they’re at a little bit of a loss at that point, but at least they’re not completely at a loss if you run.  But they would give you up to 30 or 60 – I’ve heard of even some vendors going at 90.  I know it’s a pretty popular thing domestic side, but it is capable on the Chinese side so maybe that’s in your future.

Mike:   Yeah, and I’ve learned this from other mastermind folks.  I know some people firsthand that have terms with Chinese manufacturers and they’re the ones that brought this to my attention first but it does seem to be – because I’ve asked now.  But I think a lot of it is you have to be at least on your fifth order with the same manufacturer and we’re just not quite there yet.

Grant:  Yup.

Mike:   So yeah, I mean I’d love to get to that point.  Even just not having to put the 30% deposit down would be a huge win because it’s pretty significant.  I mean if you look at and kind of map out everything on a dart board or a timeline or whatever and if you have 30% of your cash always locked up in pre-orders, if you can get rid of that, you can obviously then have 30% more cash laying around and I guess, theoretically, order 30% more product.

Grant:  Yeah.  And I think a lot of people that might not have the background in business, or especially in inventory type of model, are very surprised when you start ordering and business starts doing well and you might say, “Hey, I’m doing $20,000 in sales.  Not a bad thing, and then now I’m getting up to $50,000.”  Well, you need to buy twice the amount of inventory and if you are taking that money and going right back into inventory, that’s one thing but you might actually run out of money to be able to expand at that rate.  So it’s a major issue for a lot of people that are getting very successful and finding the amount of place that will even give you a loan.  A lot of banks will just not loan you money, even if you’re doing very well.

Mike:   Yeah.  And, you know, every bank turned us down.  We ended up getting some private financing through some friends that trust me personally, which is good.  But yeah, I mean I’ll tell you like just the backstory.  When we first got into inventory when we were doing CuttingBoard and when we bought IceWraps, I kind of had a cocky attitude of just, “Ah, we’ll order an excessive amount. Just don’t want to run out,” because that’s the other part of the equation, right?  You don’t want to run out of inventory.  So you kind of have the devil and the angel.  You have the devil who’s like, “Order more, order more,” and the angel’s saying, “Hey, be careful.  You don’t want to order too much.”  But at the beginning, I was just like, “I don’t want to run out.  I don’t want to have a situation where I’m out of inventory for anything,” and it caused us to order stuff that would sit around for 6 to 12 months, and now we’ve gotten a lot more sophisticated and still aren’t anywhere near where we need to be, but that’s kind of where that 90-day target came from.  So we try not to get more than 90 days of inventory in stock now.

Grant:  Yeah, and that’s where a lot of the skill in ecommerce actually is.  A lot of people think it’s all SEO and marketing, but being a buying agent, man, I cannot place the amount of emphasis on how much you need to be a good buyer.  And a lot of people wonder like, “Well, it can’t be that hard to be a buyer, right?”  The reality is, yes, it can be actually extremely difficult and that’s why there’s a lot of people that work for Costco, for Macy’s, Nordstrom’s, Amazon, and their whole job is to just do nothing but buying.  And I mean we see an army of those people at all of the conventions that we go to and the IHA show in Chicago.  I mean do you remember those buyers rolling up in like a 20-person stretch limo and they walk out and it’s pretty much like, “Well, there’s like $50 million on the table of stuff that’s going to get bought by these people right here?”

Mike:   Yeah.  Yeah, that was pretty funny.  So yeah, and it’s interesting because we went through this kind of life cycle with IceWraps and I think also with CuttingBoard, where we went from, “We don’t want to ever run out of stock,” to, “Let’s manage our cash better and if we run out of something, so be it.”  And then, as we’ve been doing more Amazon, the equations kind of flip again a little bit because if you run out of one SKU on something like IceWraps or CuttingBoard, there’s really no real negative repercussion.  I mean it can be negative but you might lose one sale.  You’re not going to lose your SEO rankings, you’re not going to lose any long-term sales.  But on Amazon it’s different, right?  So if you do run out of inventory on Amazon, it can hurt for a really long period of time.  So it’s really the stress level for me on getting the inventory purchases right.

Grant:  And I’m actually going to kind of correct you a little bit over here on the SEO side.  The default setting is generally to leave a product up when you run out, I believe, on BigCommerce but I know that there are platforms out there that if you actually run out of a product, it’ll actually take it away completely so it doesn’t show on the search engine, and that’s the worst possible setting you can ever have.

Mike:   Yeah.

Grant:  It’s really like shooting yourself in the foot because, while you’re out of product on there, then you’ve essentially blacklisted your own top-selling item off of your own website.  So you want to make sure that you do not have that setting on at all costs.  So double check that and make sure that your product listing doesn’t vanish if your inventory goes to zero.

Mike:   Yeah, that’s a great point and I definitely agree.  I mean we definitely have that off for our site, including our pencils, which have been out of stock forever.  So people see them there, but at least we haven’t lost our rankings.  But that aside, I don’t think – what do you think, Grant?  It doesn’t really have the same negative impact on your own site like it does on Amazon.

Grant:  No, not at all.  And something that I actually do is, on some of my more popular items that I run out of stock on – and usually I don’t get stocked out anymore.  It was a big problem when we first started, like we just didn’t know what was selling.  I actually put a promotion or a bonus offer on those pages saying, “Hey, I’m sorry I’m out of this product, but guess what?  Here’s a $5 coupon.  Go buy something.”  And on ChoppingBlocks, I actually put that on my 404 page because I migrated that from Miva Merchant so a lot of people still end up on some random page that’s like 10 years old somehow and I don’t know why the redirects haven't worked.  But when they land on that page, it goes, “Hey, sorry, we couldn’t find that.  By the way, here’s a coupon code.”  And I actually have a few conversions off that so I actually try to make it work in my benefit, but on Amazon, yeah, there’s no benefit at all.  You’re just, “Do not pass Go.  Do not collect $200.  Just lose.”

Mike:   Yeah.  So, if you’re ordering something for the first time on Amazon – I’m curious to get your thoughts, Grant – how do you pick your minimum order?  It wouldn’t necessarily be the same minimum order as the manufacturer, but what do you consider your minimum order or threshold for a brand new product when you’re on Amazon (and I’ll throw one other stipulation in there) and it’s from Asia and you know to order more, it’s going to be another 90 days?

Grant:  So, it’s a lot like what you said.  I will say here’s my method (and I know we probably will disagree a little bit) but I would say at the very minimum, you need 20 items just for your promotions, and I’m saying giveaways and reviews and that kind of stuff, and you need probably about 30 to 40 for people that will actually get your product.  And if you’re ready to pay for the air cargo, then you can probably leave yourself at 60 to 70, depending on how popular your item gets.  But I would say, personally, if I were under 100 units, I would not be happy because you might promote your items and they might sell really fast and then suddenly you’re completely stocked out and you’ve lost all your work.  What about you, Mike?

Mike:   Yeah, so I was mentioning this on the forums this week too, but my minimum now is 600 units.  And obviously, there’s other things that kind of play into this, you know, if it’s a $2,000 item or something, obviously the equation changes.  But for things that we’re generally selling for less than $100, my minimum is 600 and here’s why: First, I agree with the idea of like having promotional giveaways.  We typically end up giving away more like 50 for a product.  When we go after something at launch, it’s usually pretty aggressively and it’s definitely helped us quite well.  But then if you take 600 and divide it by 5, which is basically what our worst items are selling, basically 5 a day, it’s really only 120 days of inventory.  And if you subtract out the giveaways, you’re basically right at 90 days.  And what’s ended up happening to me for everything else that we’ve ordered, I’ve already regretted not having at least that number.  So that’s kind of why I picked that number and it seems aggressive, but I think confidence has kind of helped get us to that level.

Grant:  And on those 600, is that a product that you’ve tested a little bit or is this a non-tested product?

Mike:   Non-tested product.  Yeah, I mean, again, I know it sounds crazy and a little bit aggressive, but everything that we’ve done that we’ve ordered 200 of something or 300, it kept on kind of ramping up as we ordered new products, but what ends up happening is we run out of every single one of them.  And then we can’t get them in stock and we have this period where we’re out of stock and have to basically do all the promotional stuff over again and it’s really frustrating.  So we end up spending more time now upfront developing what I think is a really good quality product more than we did before.  So we put just a little bit more upfront effort into it and I feel like if it’s a really high-quality product and we have a high degree change of success, that that 600 is kind of like the floor number for us.

Grant:  So here’s where I might actually say that the metric might be better off on an actual absolute cash basis as opposed to unit basis, and here’s why: 600 units, if you’re paying, let’s say $5 to $6 a unit, isn’t so bad because that’s $3,000 to $6,000.  You know, some people might go, “Oh my God, that’s a ridiculous amount of money,” but let’s be realistic.  If you can’t dump that kind of money into one product and really expect it go, you’ve got to kind of reevaluate how to play on a little bit different level.  But if we’re talking a $30 unit though and now we’ve got 600 units, now it’s $20,000, which is a fair amount of money for anybody really. Even for you that's a medium bet.  Nobody wants to lose $20,000 on a product that can’t move.  So I do think the total amount put out does play a big issue into it.  Wouldn’t you agree?

Mike:   I do.  But $20,000 is still in our comfort level zone because I still feel like we’re going to sell out of that in the same relative speed, right?  Because we don’t want to be buying items to begin with if we don’t think we can sell at least 5 a day.  We’re doing all that other research upfront, and we’ve talked about that on other episodes of the podcast so I don’t want to get off on a big tangent, but we’re doing research that tells us that we’re going to sell 5, 10, 20 units a day.  It’s kind of like the sweet spot we want to be in, and if we think we’re going to do it, why not do it to begin with rather than do it, find out that the product’s doing well, gets good reviews, people like it, run out of it, have to then place a reorder, wait another 90 days, and for some 30- to 60-day period you’re out of stock and then having to re-jolt that listing again by having to give more giveaways and get them.  Because you lose all that momentum and ranking so that’s just kind of been my thought process.

Grant:  Yeah.  So I’ll give you a few examples of some of my listings, and I’ve got a fair amount of listings that are only moving maybe about 30 to 40 units a month right now and they have been promoted and for whatever reason, they’re just not operating as well as they should be.  I’ve got a number of ones that are doing exceptionally well.  I’ve got one that’s doing about 600 units, another one that’s doing about 250 a month.  But on the 40 to 50 units a month, that’s maybe one and a half to two units a day and I might have around, I believe, 400 of those.  So unfortunately, I’m going to be stuck at, yikes, like 250.

Mike:   I’d say you’re –

Grant:  Yeah, 250 to 300 days.  And it used to be with Amazon that you could rely on the holidays to really push out your stuff, but now (a lot of people might not know this, especially if they’re getting into Amazon), the storage pricing come November and December is – how much is it again, Mike?

Mike:   It’s like five or six times the standard rate.  I forgot what it is per cubic foot, but it’s damn expensive.

Grant:  Yeah.  I think it went from 40 cents a cubic foot to what?  $2.50?

Mike:   I think it’s about $2.50, yeah.  Yup.

Grant:  Right.  And I mean if you’ve got like fuzzy bears, I’m sorry.  I mean that’s like horrible.  This is like the one time where I’m a little bit happy cutting boards are nice and dense because I mean even a cutting board is like at two cubic feet for a big one.  So I mean you’re –

Mike:   Yeah.

Grant:  It’s not a joke.  $2.50 times however much product space you’re taking up, it can get very expensive very fast and –

Mike:   Just real quick, like one thing I think that we have an advantage of by having our own warehouse is we don’t send all 600 units into Amazon at once, so that number that I was mentioning earlier.  So we’ll send those 600 units here and we typically will send, it depends on the size of the unit but, like one case or two cases or whatever of a product in and then, from there, we send stuff in because we have regular shipments that go into Amazon.  We’re sending like three to five pallets a week into Amazon, so we just add the stuff to the pallet that’s needed that RestockPro is telling us to send in and that’s kind of the way that we handle it.  So we’ve actually done a really good job of not letting inventory sit at Amazon.  Like even though we own inventory that we’ve been holding for longer than we like, that’s one thing that we have a really good handle on, is we don’t pay any long-term storage fees.

Grant:  Yup.  And I’m in the same boat too.  I refuse to pay Amazon $22.50 for the long-term storage.  And if people don’t know that, it is around $22, right?  For the long-term?

Mike:   Yeah, for the six-month one, and then it’s double that for the twelve months if you ever get yourself in that situation.

Grant:  I can’t even imagine.  But basically, if you’ve ever decided that you just hate life, you leave your product on Amazon for more than six months and you don’t have long-term storage automation turned on, what it means is that every cubic foot of product, you’re being charged $22.  And I know just about nothing that can survive that cost and not completely put you into the hole.

Mike:   Yup.  Agreed.

Grant:  Essentially, you need to take your product off Amazon, and then if you really want it back on, you just ship it straight back to them.  That’s how you do it and you just keep paying.  But I think they actually have a rule, right?

Mike:   Yup.  So they won’t let you do that.

Grant:  Right.  So yeah.  You just have to hold onto it or just figure out a way to liquidate so…

Mike:   Yup.

Grant:  Or you get into the buying liquidation items off Amazon business, which one of my buddies is into.

Mike:   Yup.  So I have an interesting question for you then, Grant.  Based on what we’re talking about here, what situation would you rather be in?  Like Situation A would be you order let’s say 100 or 200 of an item and if it sells five a day, which is kind of your target, or ten a day, which is even better, and you then run out but you know that you have a product that’s going to sell well when you reorder it, theoretically, you should be able to get your sales back.  Or would you rather be in Bucket B, which would be you order 600 of them, like I would, but if things kind of go a little bit sideways, you end up having a product that you might have a 12-month turn on?

Grant:  That’s a darn good question.  I think that depends on how much money I have behind me really.  Because one of them is a higher risk reward than the other, wouldn’t you say?

Mike:   Yeah.  I mean I can tell you the reason I order the 600.  Again, because we do a lot of research upfront, and a little bit of it is cockiness, I don’t have any products at this point that have really failed that are, you know, doing one a day or two a day.  Even a couple things that we were doing inefficiently just a few months ago that were kind of straggling around that we’ve since resurrected as listings and they’re selling well again, you know, I just like to bet on myself and I don’t want to be in a situation where I can’t sell the inventory at all, but even having it where, let’s say you have 1 out of 20 products that ends up in that bucket.  I don’t think I’m ever going to bat a thousand forever.  Let’s say if 1 out of 20 is kind of a failure and it does take me twelve months to turn, I think the long-term cash flow management and success, long-term profitability, you’re better off taking the change and being in Bucket B than what happens if you’re in Bucket A because I think that there’s a lot of cost in developing a product and getting it in.

So you have that part of it.  And then if you run out, then you’re putting more money into having to give away product again and then you’re missing out on the cash flow during that time and you’re locking up like theoretical money because you know, “Okay, this is going to be a successful product,” so you have to earmark money and put that 30% deposit down and not spend the other 70% during that time as well.  So there’s quite a bit to it and, I don’t know, that’s just kind of my thought process.  maybe I’m completely off base.

Grant:  Yeah, and I think it really like takes into the account skill of the buyer, and that’s what I was saying before.  And I do think – ha-ha, we’re going to talk about luck again.  I don’t think you’ve been unlucky thus far in having a product that has failed, and a lot of that, you know, credit is where credit is due.  You’ve obviously done a lot of research and I’ve got a few products that I felt like I did the research on, it looked like there was a fair amount of products that were selling in the right space, took samples around, asked a bunch of people what they thought, they said they’d buy it, put it on, did a marketing run, just crickets.  And sometimes, you just go, “Well, did I do something wrong?”  But the market speaks and at some point, you just go, “Okay, do I just continue shoving more promotional money down the drain or do I just say, ‘Time to liquidate?’”  I think I might be on that on like one or two items.  Luckily, it’s still rare for me.  I should be able to sell out for most of my items, but again, I’m not warehousing everything on Amazon either.  If I did, I’d be in a very bad spot, especially with their new holiday rates on the long-term warehousing.

Mike:   Yup.  And I use the warehouse to our advantage and we’re both in the same situation.  So I mean I realize that people that don’t have a warehouse are at a little bit of disadvantage there because then it increases your risk.  But for us, the warehouse is a sum cost.  I’m in a long-term lease.  I’m going to pay that money month in and month out regardless.  And I might as well use it to my advantage.  So we use our warehouse basically as a cross-dock and the things that are the most successful we’ve been sending directly into Amazon from our manufacturers, the things that we know are going to turn at the 90-day rate.  And things that we’re still unsure of or we think that we’re going to need to hold onto longer, we keep those here and that’s kind of the way that we’ve been handling it.

Grant:  Yeah.  And speaking of warehouse and cash flow, I do think it’s interesting to talk about that a little bit.  I use 3PLs and I actually think, when it comes to cash flow, a 3PL is actually an incredible way of going because –

Mike:   Yeah.

Grant:  I can scale up.  Like I’ve got containers going in and, depending on what 3PL you use, you can get them as cheap as $10 a pallet space.  And I think mine right now is $20 a pallet space, but you’ve got 24 pallets coming in and you don’t need to get an upgraded warehouse, you just pay 24 spaces times $20.  So I’m paying $500 a month more, but I would say four of those are going to be launched immediately into Amazon and they’re going to go.  I think when you calculate out Amazon, it comes out to about $14 or $15 per pallet space before the holiday hits, so they’re not terrible, they’re not great. So –

Mike:   I think they’re even cheaper than that.

Grant:  Yeah?

Mike:   They’re pretty cheap.  I mean I think that, from my math – and it’s been a while since I’ve run this – Amazon’s cheaper short-term.  Like there’s nothing that can beat Amazon’s storage fees short-term, but once you cross that 6-month mark, the equation flips so it’s always a game of cat and mouse.  So I think having the inventory, to me, it’s like a safety zone.  You can keep it in your own warehouse or in a 3PL first and then you drip it out to Amazon.  To me, that’s the safest way to do it.

Grant:  Yeah.  So having your 3PL, it makes it good because that way, you can trickle your inventory into Amazon as needed, so it’s almost like your buffer zone and you just put more inventory as needed and hopefully when you’re selling a lot, then you can just shove the rest on there and if you’re not selling, then well, at least you’re not paying the long-term storage fee.  I would say the only thing that’s bad is that there is no good way of separation off Amazon.  It is a divorce in the worst possible way.  If you have goods on there that you can’t sell and you want to take them back, well every last warehouse that you sent your stuff to, you’re going to take them back from every last warehouse in all shipments, in all sorts of forms and containers and it never ends up back to you in a pretty fashion.  So do your research.

Mike:   Yeah, I agree.  Yeah, it’s definitely kind of like a one-way street where you don’t want to ever have to get stuff coming back.  We actually took advantage of some of the – Amazon did have, I think it was in April, basically a free recall from Amazon warehouses.  And when we first started selling one of our products, we had it in a bunch of different variations and colors and we’ve since realized that that was just kind of silly, so now we only offer things in four colors so we recalled all the colors that just don’t sell and we aren’t ordering those anymore.  But yeah, when the stuff showed back up, it was not in perfect condition, that’s to say that least.

Grant:  Yeah.  And colors is one of the biggest mistakes we made with CuttingBoard when we started.  Just kind of getting a little bit off-topic, but I think the biggest problem that somebody will make in the very beginning is saying, “Hey, I want to be that guy that has a wide selection of everything and you can come to me for everything.  We’re going to have all colors and all sizes.”  And man, there’s a reason why a lot of sizes and colors cannot be found in a store, and that’s because it takes a lot of inventory and a lot of room, and a lot of that stuff doesn’t move.  I remember going to a Banana Republic clearance sale and they had a bunch of salmon pants, man.

Mike:   Nice.

Grant:  Yeah.  Salmon!  And I mean I like eating salmon and I like a salmon sushi.  I know Mike likes salmon sushi, but do I like salmon pants?  You know, who’s Mick Jagger that’s going to be walking around?  And they had like 50 pairs of this stuff.  And you just say, “How can one store have 50 pair of salmon pants?”  I can only imagine maybe 10 people in Seattle that might want salmon pants but maybe I’m wrong.  But apparently they were wrong because they had a lot of –

Mike:   They had a bad buyer.

Grant:  Yeah.

Mike:   You were talking about buyers earlier.  That was a bad buyer.

Grant:  Exactly.

Mike:   So… cool, well, it’s been an interesting conversation.  I actually had a lot of fun doing this.  I’d love to hear from our audience as well.  I mean I’m sure a lot of you have the same concerns and maybe some of you guys have figured some of this stuff out better than we have.  We’d love to even have potentially someone out there that is an audience member as a guest on the podcast to talk about this as a follow-up or something because it’s so important with ecommerce and it’s definitely something that Grant and I have learned through hard knocks.  It’s been a big wake-up call going from thinking I had plenty of cash to run my business to I could use a loan from Amazon or through a third party.  So definitely flipped things on its head.  So definitely an interesting topic.  As a reminder to everybody, if you have a minute to go over to iTunes, leave a review.  We haven’t said that in a while but we definitely appreciate the reviews and we do read them on the air every now and then and definitely appreciate your support.  And thanks, everyone, for listening and we shall talk to you next week.

Grant:  Take care, everybody.