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Navigating e-Commerce in the Amazon Jungle

Posted by Lucas Walker on
Navigating e-Commerce in the Amazon Jungle

 

Kurt Elster has an Amazon Prime membership and no fewer than eight Amazon Echo devices in his home. That wouldn’t necessarily be noteworthy unless you know how Elster makes his living. He’s the CEO and founder of Ethercycle, a company that helps entrepreneurs make money on Shopify.

Like the Biblical parable, Shopify is the David to the Goliath Amazon. Even an e-commerce consultant who built his career helping entrepreneurs make money on Shopify can’t resist Amazon.  

He’s not alone. A whopping 55 per cent of all e-commerce dollars in the US are spent on Amazon. Says Elster, “That sounds an awful lot like a monopoly to me.” 

2020 was a defining year for e-commerce. The pandemic and stay at home orders bumped online shopping to new heights. Elster argues it also led to a permanent change. Suddenly conscious consumerism and sustainability have become much more top of mind for e-commerce entrepreneurs. And I think it’s part of the pandemic. At the same time we’re thinking more about Amazon and what is the impact of their broad reach?”

Amazon has emerged as a vertically integrated giant from its humble beginnings selling books online. Brands pay rent to be in Amazon warehouses. Consumers pay monthly fees for Prime memberships. Amazon gets a cut of every sale. Yet so far, the US federal government has not turned an eye to them as they have with companies like Facebook and Microsoft. Not yet. “If those companies got the critical eye from the federal government, I think it’s just a matter of time for Amazon. And I’m sure that’s why they spend what they do on lobbyists.” In 2019, Amazon spent $17 million lobbying American politicians, up from $14 million in 2018.  


“If anything goes wrong, Amazon washes their hands of it.”  


As an example of Amazon’s influence beyond the retail space, Elster points to the many contractors who deliver merchandise to your doorstep at record speed. He says drivers often defer maintenance on their vehicles to cut expenses and make more money. That raises safety issues. “If anything goes wrong, Amazon washes their hands of it.”  

Elster also questions the tremendous impact Amazon can have on vendors. “They have this wonderful source of data” on what is selling well. Using that data, the company can decide what to produce and sell under its private label, Amazon Basics. “I would imagine they are going to be able to operate with an economy of scale where they get better deals and better margins on the same items that their own merchants are selling. If you do too well, you are now competing with Amazon. And that one is questionable.”


“You Got To Be Your Own Hype Man”


Getting attention for your product, whether it’s on Amazon or Shopify or your own web page, will be the first challenge for anyone moving into e-commerce.

 “It’s about building hype and awareness. First people need to know you exist. You’ve got to build that hype. You need a hype man. And you got to be your own hype man and you have to be building that audience.  

And you’re going to start small. It’s going to be friends and family and then on down the road.”

Elster says messaging and positioning is the thing that will make or break you. “A brand is very much like a mud golem. It’s just a big lump of clay until someone breathes life into it. It’s meaningless. But you start putting branding to it, you start putting content behind it...and you start building a community around it, then it starts to mean something.

It starts to have an association.  

“You have to view everything as relationship building. It is very human and it’s very squishy.” 

According to Elster, step one of launching any e-commerce brand should be building the audience. “If you don’t have that audience what are you going to do? I think that is...the number one mistake I see people make over and over, new brands at least, and I find it very frustrating. They're like, I've got the best idea. I’ve got the coolest designed website. I’ve got this really cool logo. Everything is really slick. Oh ya? Who’s your customer? Why do they buy, what do they get out of it? How do they view themselves?

“If you don’t put in the work... you don’t build the audience and your messaging doesn't connect, you don’t know why they want to buy, you don’t know what they get out of it, how are you going to get anywhere?”


“Do any of us really know what (we) are doing?”

Elster has been in the e-commerce space since he was 16, starting with his own eBay account when the company was in its infancy. Now, at age 37 as an e-commerce consultant, he acknowledges much of what works is still being sorted out. “It is so new and it has evolved so quickly, do any of us really know what (we) are doing? I suppose I know more than someone just starting out, but it is very much just like an unending, continuing learning cycle with e-commerce.” 

Episode Transcript

Lucas Walker (00:01):

Polymath is a word that I first started noticing earlier this year. And it really is the best way to say somebody who embodies so many different things. And that's who this guest is. He has his own podcast, which you've probably heard. He has a few apps in the Shopify app store. He has a consulting business working with big name brands like Jay Leno's garage. And he had his own community as well with one of the biggest and most active Facebook groups in the Shopify ecosystem. I could go on, but you probably have guessed who I'm talking about already. Kurt Elster is the host of the unofficial Shopify podcast. He also has a handful of e-commerce communities, which have become very tightly knit. His agency, either psycho works with some of the top name brands like Jay Leno's garage and tactical baby gear. And he's been a speaker at events all across the world for the past several years. But today, as we celebrate Festivus

Frank Costanza (00:59):

The tradition of Festivus begins with the airing of grievances. I got a lot of problems with your people. You're going to hear about it.

Lucas Walker (01:09):

I thought there was no one better to kick off the rolled up podcast and Kurt to join me, unleash the Larry David within as we air out some grievances.

Kurt Elster (01:18):

It's, it's strange because 55% of e-commerce dollars get spent on Amazon. That sounds an awful lot. Like a monopoly to me.

Frank Costanza (01:25):

Holiday was born a festival.

Kurt Elster (01:29):

Amazon spent 17 million in 2019 online it's 2018, 14 million. Clearly I'm coming across here as anti Amazon. I still have a prime membership.

Lucas Walker (01:40):

Hold on, hold, hold, hold, hold. It's not just an Amazon Fest. This is half the podcast. We're also going to be talking about his career, where to start your career in e-commerce than building an online business and some of his podcast pet peeves, because unlike me, he's hosted over 350 episodes. So here's my conversation with Kurt Elster. True. E-commerce polymath on the podcast As someone who's doing so much, how do you identify and how do you like to introduce yourself?

Kurt Elster (02:12):

Well, the short answer is I say, Hey, I'm an e-commerce consultant. And ideally that sort of like saying to someone I'm a dog lawyer, like they're either going to go, I want to know more or they're going to, their eyes will glaze over and they'll move on. If I distill it down to two words, just e-commerce consultant. But really like when I think about what's my, why, why do I do this? I view myself as a champion of entrepreneurship. I want to enable entrepreneurs. And, you know, I have always loved computers and business and entrepreneurship. And so e-commerce was just such a natural thing for me, starting, you know, with eBay, when I had account illicitly 16 up to now, I'm 37 and I have been working on Shopify exclusively for the last six years working full-time in an agency that I founded 11 years ago. And before that I was doing just independent, I was a, a e-commerce consultant as well.

Lucas Walker (03:08):

Wow. Uh, so in an industry that grew 10 years in three months, you have like 45 years experience if my math is correct.

Kurt Elster (03:16):

Yes. Yeah. Uh, roughly, well, it's funny about e-commerce is like, it's so new and it evolves so quickly that do any of us really know what we're doing? Yeah, I suppose I know more than someone just starting out, but it is very much just like an unending, continuing learning cycle with e-commerce. And I think

Lucas Walker (03:39):

This year with everyone's talking about black Friday, when do we start the promos? And it was all kind of everyone looking around to kick the party off because what worked last year, I don't think anyone was a hundred percent confident that they could run the same promotion or have the same setup this year that they did

Kurt Elster (03:56):

Last year. Well, 2020 is quite the adventure, quite the dumpster fire, but it threw everything out of whack. And yet we survived, you know, everyone adapted, like I learned this year that e-commerce entrepreneurs are the bear Grylls of entrepreneurship. They improvised, adapted and overcame a global viral pandemic.

Lucas Walker (04:18):

Somehow some businesses did quite well. It, depending on what you were doing, I remember hearing stories in, uh, sort of April where puzzles and fitness bands, people were either kind of dropshipping or just doing it like a little side hustle. They had sent some private label to Amazon and all of a sudden they were maybe doing 5,000 bucks in sales a month. They sold out $40,000 worth of inventory. Or if it was more of a legitimate business, they had to go from a five to 8,000 square foot warehouse to 10,000, 15,000 within

Kurt Elster (04:49):

Two months. Yeah, it was, uh, it was a strange time. I think what's interesting about the pandemic is there are so many spaces and technologies that it accelerated, where do they like even talks around, um, seemingly unrelated things like sustainability and climate change. Suddenly I feel like conscious consumerism and sustainability have become much more top of mind for e-commerce entrepreneurs. And I think it is part of the pandemic. And then, you know, at the same time, we're really starting to take, uh, you know, thinking more about Amazon and what's the impact of their, their broad reach. But at the same time, like a necessary evil in the world. And even where like in the U S it's, it's strange because 55% of e-commerce dollars get spent on Amazon. That sounds an awful lot, like a monopoly to me they've built like it, the whole thing's vertically integrated, horizontally integrated. They have, um, their own shipping network. You're dealing with shipping over black Friday at the time of this recording. And really like ups is struggling. FedEx is struggling. Amazon seems to be keeping up.

Lucas Walker (05:52):

I think FedEx is struggling. I think FedEx drowned. I'm not hearing lot of good things about FedEx.

Kurt Elster (05:58):

Yeah. It seems like FedEx got hit the hardest. I know we had one client, um, they had, uh, 4,000 orders packed, ready to go. They had another three or 4,000 waiting to be packed. And they gave FedEx these projections and advanced based on previous years to their FedEx rep and their FedEx rep said, Oh, well, you're capped at a hundred orders a day. That's it? And they said, well, could we take to the hub? They said, no, there's no space for it. I said, uh, what are we supposed to do? And so like five days of complaining straight and FedEx sent out a 20 foot trailer on a Saturday and got everything. But it seems like that's what that a lot of these, these smaller businesses are getting these, these quotas, but even big ones, right? Like right after black Friday, we heard these stories of like, you know, colds, Nike, uh, these really big retailers getting the same quotas. It was scary, but it seems like packages are moving. There are delays, but they seem minor. They're like a few days in general.

Lucas Walker (06:54):

It's not bad here in Canada. I've ordered a few things and gotten them pretty quick. But I'm also in a major metropolis. I imagine it's different if I'm outside of the city.

Kurt Elster (07:05):

Yeah. It depends. It is very much geographic. So I'm 40 minutes outside, Chicago and things have not been bad, but you know, depending on where you are in the city of Chicago proper, it's like, Oh, you're going to get a letter this week. And that's the sole of your deliveries. Yeah.

Lucas Walker (07:23):

Or it all just shows up at once. And it's congratulations. You have to bring a skid into your one bedroom condo. So if you haven't guessed yet, Kurt and I were recording the episode during black Friday shipping and the aftermath it's going to air on December 23rd, which is the national holiday of festivals. And we were celebrating by the airing of grievances for all the e-commerce founders were championing and really kicking off this new podcast series that I'm doing just to wrap up, uh, absolute dumpster fire, dumpster fire doesn't even do it. Justice, just to wrap up 2020 and kickoff 2021 on a much more positive note.

Kurt Elster (08:06):

You're listening to hold up like a burrito. How was that?

Lucas Walker (08:10):

Perfect. But let's dig in a little bit more because like you said, Amazon 55% of e-commerce revenue, how is that not a monopoly because they have, if you have 51% of a vote, you control everything. So the only industry, and as I'm watching the crown on Netflix, all I can think of is you have brands paying rent in Amazon's warehouses. You have consumers paying memberships, which a recurring monthly fee is essentially rent. And then Amazon is also getting a cut of every sale from the merchant who seller, which is essentially a tax. So how is Amazon not a kingdom with its own monopoly right now?

Kurt Elster (08:48):

Just because the U S federal government has not turned their eye to them yet. And it really seems like they do this based how long the company has been around like Microsoft and Intel's antitrust lawsuits. It was think it was like exhibit almost exactly 20 years from when they were founded to when it happened. We're now seeing the same thing happen with Facebook where they're, they're gonna break up Facebook, like at, and T is what it looks like they want to do. So I think if those companies got that critical eye from the federal government, which now that's not a pleasant experience, nobody wants that. But, uh, sometimes a necessary, necessary pain. I think it's just a matter of time for Amazon. And I'm sure like, that's why they spend what they do on lobbyists.

Lucas Walker (09:34):

Do you know how much they've spent? Do you have that stat off the top of your head

Kurt Elster (09:37):

In 2019 Amazon spent, they spent 17 million in 2019 on lobbyists. Wow. Yeah. 2018, 14,000,020. So every year they're spending eight figures on lobbying DC.

Lucas Walker (09:55):

So imagine the average e-commerce brand, if you're doing 5 million a year in e-commerce, that's pretty good. They're essentially spending three times that revenue on just lobbyists. That's how big Amazon is

Kurt Elster (10:08):

For them to, I imagine a lot of that focus was like trying to stop sales tax or like a federal e-commerce sales tax, which that does, I mean, that benefits the entire industry. Consumers don't want to pay the tax and merchants don't want to deal with it.

Lucas Walker (10:21):

And it gets very complicated as well. If you have inventory in different States shipping to different States, it does get very convoluted in weird ways.

Kurt Elster (10:32):

Why clearly I'm coming across here as anti Amazon. I still have a prime membership. Oh. And there's literally eight Amazon echo devices in my house. So definitely a little hypocritical, but we had, we had canceled prime and then the pandemic hit. And lo behold, here I am, again, the thing is unavoidable.

Lucas Walker (10:52):

You can't escape, Amazon's reach. And even, uh, do you remember a few years ago when AWS went down and just how much of the internet was impacted by it?

Kurt Elster (11:00):

Anytime I see you see like a, an internet outage, there'll be, you know, it'd be like half a day where a whole bunch of sites go down. You can almost guarantee it's AWS. And again, like this is where things start to get concerning, where they control so much of modern life.

Lucas Walker (11:16):

And I mean, when you think about it, they control websites, streaming entertainment, they just release a movie, probably one of the top buzzed movies of the year in Barat, too. They have their warehouse network plus their entire shipping network, which like you said that at the start of the pod, FedEx ups, USBs, Canada, post they're all struggling. And yet Amazon, it doesn't matter. They're still fulfilling those prime promises. They're just huge.

Kurt Elster (11:46):

Honestly, I think the shipping network is probably like one of the most problematic parts of Amazon's empire, like are plenty of articles about this, but what they do, a lot of the, the Amazon fulfillment is done by contractors, like how we contract these people. But the contractor only does deliveries for Amazon. And then Amazon, like, they had this very systemic process of being like, all right, we're going to give you this area. And we're going to give you these packages. And they essentially get you hooked on the money as a business. But then at the same time they go, if anything goes wrong, they go, well, they're not our employees. We don't own that business. Those are just contractors. So like anything goes, you know, they're only delivering for Amazon, but then anything goes wrong and Amazon washes their hands of it. Eh, that seems a little sketchy. And they're very much profit driven where they're, they're trying to get those, those razor thin margins to make the business work.

Lucas Walker (12:35):

Yeah. And you're using your own equipment. You're essentially driving a car for industrial purposes, which wasn't meant to be driven that much. So if you don't have a fleet of Teslas, you're racking up oil changes, uh, and just a lot more maintenance through everything else on your vehicle, which you don't pay the cost for at the time,

Kurt Elster (12:53):

That was one of the, one of the concerns raised is often maintenance goes deferred on these contractor delivery vehicles. And so then that creates like a, an inherent safety issue. And it's because they're trying to say cut expenses to shore up profit Mark Jones.

Lucas Walker (13:09):

And I don't know if a lot of people realize this. I mean, we see it in the industry, but what about just having products knockoff on Amazon, whether it's through Amazon basics, Amazon private labels, or just other sellers. What's something that if your mother-in-law was listening to this podcast, or maybe she, she might know, but the average mother-in-law who doesn't know how you commerce works, what about how Amazon can take data and just spin up their own products? I think that's another item, uh, to reference because as we're really airing of grievances, Amazon's not that great. So if you're a driver, not the greatest, and I didn't really mean to turn this into a, an Amazon fast, but they're just so big.

Kurt Elster (13:52):

Well, plus we have an agenda, right? It's very much Shopify versus Amazon. Oh, absolutely. David versus Goliath. It is,

Lucas Walker (14:00):

We both, uh, made our careers on Shopify. So to spin it positively, here's why, but as a seller on Amazon, what happens when Amazon brings in their own private labels to compete with your brand?

Kurt Elster (14:14):

Oh God, that one, really, that one bothered me. When the first time I'm looking at batteries and a little, a toaster widget will slides up from the bottom of the screen and says, you should consider this other product. And it was Amazon basics. And so Amazon has this category data where they can look at, they know in any category, uh, how much an item sells. What's the best seller, what are the fastest growing products? And so it's very easy for them to, they have this, this wonderful source of data and for them to go, okay, well, here's the stuff we need to sell ourselves private label. And they could do it like tremendous mass. And they have the network where it is probably, I would imagine, you know, they're going to be able to operate with an economy of scale where they get better deals and better margins on the same items that their own merchants are selling. And so it's strange that they're like, Hey, you know, we're, uh, anyone could come on board and sell items on Amazon. Also, if you do too well, you are now competing with Amazon. And that one is questionable.

Lucas Walker (15:20):

Yeah. I'm not a fan of that. Where you spent all the money to just create a product you're paying Amazon to store it. You're paying Amazon to advertise it. And then you do all this work to get them to your product listing. And then they pop up, well, what about this product for half the price that's prime eligible. And you can add it to your order and we'll give it to you for free. If you subscribe to Amazon prime today, it is. And it goes beyond that as well, though, with just the ambulant basics brand, because Amazon has their own brands of, of everything. I mean, technically any whole foods house brand is, is Amazon.

Kurt Elster (15:53):

Oh yeah. I'm gonna think about that. Jesus.

Lucas Walker (15:56):

I forgot that Amazon owns whole foods.

Kurt Elster (15:58):

I went to whole foods late last year and the weird thing about it, they were handing out flyers. They're like postcard, wicked things about like, essentially like what a great employer Amazon whole foods was. And like how the whole foods employees were so thrilled. It really, it was very strange. It was like PR propaganda. Yeah.

Lucas Walker (16:20):

Foods and an employee in quotation marks and the alleged employee hands you this postcard.

Kurt Elster (16:24):

So no one handed it to me when I got there, they were littered on the ground around the entrance. So I'm assuming they were handing them out, uh, either like on your way in or out. And then they were just, people were just tossing them around. Yeah.

Lucas Walker (16:36):

It's either propaganda or the world's worst recruiting campaign. It's

Kurt Elster (16:40):

Something, I don't know. The whole thing rubbed me the wrong way.

Lucas Walker (16:46):

If you notice that nomad goods loads way faster than your site, I know it looks faster than mine it's because they're on headless commerce and they're using Shogun frontend for their headless commerce. So head to Shogun, look for their nomad case study. If you do a demo, tell him Lucas Walker, sending you to the show. Another, uh, Amazon thing, uh, since you do have your office in the mall is the Amazon cube. What was that cube again?

Kurt Elster (17:15):

The cube, the mall Westfield old orchard mall in Skokie, Illinois is one of the oldest malls in America. And their vision was, Hey, let's make this as much a community space as it is retail, which was cool. And so they've got it really cool green spaces. And you see like a lot of people just going to walk their dogs at the mall, it's an outdoor mall. It was very neat. And they had an event space in there. There's this big glass cube. I tried renting it for an event once a Shopify meetup, but Samsung outbid me. They have bigger pockets than I do. And anyway, uh, Amazon did a pop-up in there in jeez. How long ago was that? It might've been 2018 or 2019, but they put a pop-up store in there. It's a small space. And then they never left. So they've been in there ever since, but every like six weeks or so, they changed the theme, but it's literally like you go in, you could see the merchandise, it's a pop-up shop with a theme.

Kurt Elster (18:09):

So like one theme was like Barbies anniversary. One time it was Batman. Uh, one time it was like just, you know, uh, it was a promo for audible, but you just go in and they've got like two it's small. They like two rows of shelves and they've got the items you can see if you can play with them. There's a single employee. And then if you'd like the item, there's a QR code and then you buy it from Amazon and they ship it to you. It was always kind of fun to check out like it wasn't, you know, super popular.

Lucas Walker (18:35):

Cool. And sounds like a good concept. But do you remember Mitch Hedberg, the comedian with a bunch of one-liners Mitch Hedberg? Yeah. Do you remember his joke about the donut? And he would say that

Speaker 4 (18:45):

I bought a donut and they gave me a receipt for the donut. I don't need a receipt for a donut. I'll just give you the money. You gave me the donut and a transaction. We don't need to bring egg and paper into this. I just cannot imagine a scenario where I'd have to prove that I bought a donut. Some skeptical friend don't even act like I didn't get that donut. I got the documentation right here.

Lucas Walker (19:21):

You don't need a QR code. Just give me the product that I'd like to purchase, pay it home and open it. W how about I give you money for this product? And I leave. That's all we need to do here.

Kurt Elster (19:30):

Well, then at the same time, there's those Amazon, um, convenient style stores where like, you literally, you go in, you pick up your item and you just walk out and you're charged for it. Oh, I forgot about those. Yeah. I've never been to one. So I thought like, Oh wow, it's going to be the future of retail. And that's what this Amazon, the cube would be the cube being literally the name of this space. And no, no. It's like a pop-up showcase. I don't know. It was weird,

Lucas Walker (19:54):

But I was just writing down off the top of my head, all this stuff that Amazon does own. So obviously Amazon, their backend logistics, prime video, they have their own exclusive podcasts. Uh, I don't think we're going to get the Amazon prime exclusive podcast. After this episode, though. Whole foods, they own good reads. They own IMDV as well. Like, is there anything that Amazon is not touching? Oh, I'm

Kurt Elster (20:17):

Sure. There's, there's something

Lucas Walker (20:35):

The most,

Kurt Elster (20:50):

But the fact that you said, is there anything Amazon doesn't touch? And I'm like, yeah, probably, but I don't know. I was going to say cars, but I just saw that like, Alexa is now in Buicks, but like, that's where it becomes strange is where when you go, well, what don't they do? And we don't know any, or you could live your whole life through just Amazon at this point. Yeah. Isn't that weird? That is weird. They don't offer housing yet. That's I think, right. So there we found something, but it could be a, uh, prime BNB where, uh, if you're a digital nomad or you just want to live somewhere for six months, you can just go show up. And the entire place is furnished with the best of the best Amazon basics, home furnishings. And they don't do a lot of furniture yet only because it's hard to ship.

Kurt Elster (21:36):

That's crazy to, to really think about let's shift gears a little bit. We outta to have a fun story, at least on the pod. What's it like working with Jalen on Jalen was garage? Well, okay. The coolest part was getting to tour the garage. It's 200 cars, 200 motorcycles in a sprawling multi warehouse. It has a focus on sustainability. I mean, you've got solar panels and wind energy is really cool walking around that place. I got goosebumps repeatedly. It just it's some of the stuff in there. And even a few cars where they go, we literally, like, we estimate the value on this for the insurance, but because it is one of one and has never been resold, no one knows the value of this vehicle. There were a few like that. Wow. Yeah. Including this old, I think it was a Bugatti that was in, um, uh, Seabiscuit I believe was the movie. It was in wow. With Spiderman. Yes. Yeah.

Speaker 5 (22:39):

Episode with Jay Leno's garage,

Speaker 6 (22:41):

The car, and featuring today, the 1929 Bugatti type 40 grand sport. This is a fascinating, a little car. This is probably the least expensive Bugatti, you know, it's, it's funny. Uh, this was Bugatti's most fertile period. The mid twenties. This is when they sold most of their race cars to type 37, like type 37 80, the supercharged save 35, beat all those cars. And those cars were relatively expensive.

Kurt Elster (23:12):

Like that vehicle, like, you know, who knows what the heck it's no one knows for sure what this is actually worth. There are a couple like that. No, I mean, it's a Relic. Somebody could buy it for whatever reason, but it could go for a million. It could go for a hundred million depending on who the buyer is. Yes. It's strange to, when you get into like that level of strange rarity luxury, good. You know, just being around that and like just tangentially, like seeing the, the experiences and some of this stuff from the guys that work there, it's, you know, it's not like I met Jay Leno a couple of times and you really very nice guy remembered me, which I, I hugely appreciated. Wow. Yeah. That was, I was like, how many people, Jay Leno's Matt. And he remembered. And I was like, Oh, that was really nice.

Kurt Elster (23:57):

Like, I appreciate it. I said, I appreciate the lie. They were like, no, no, no. He really does. Like, he, he is who you think he is? So like the J letter you see on TV, actually the Jay Leno in real life. And when I met him too, they said, they said, Hey, JAG, there's somebody we want you to meet. And he was wearing the full denim. He'd just gotten his hair cut. And he's adjusting the timing on a seventies, Lincoln that he was going to take out for the week. Wow. Seemed to be like, as emo is like, he switches up a car a week would seem to be like how he operated. They said, Hey, we got somebody, he looks up from this Lincoln. And he says, it's not another one of your Tinder dates. Is it like, well looking the locked eyes with me. So he just opened with like a, a wonderful Jay Leno joke. And of course, but it was like, and then everything my mind blanked at that point. And I said, hi. And then like, I ran away. Like I was so intimidated. The first time I met him that his subsequent time it was much more normal. It was better. Oh, that's funny. Imagine if he had

Lucas Walker (24:56):

Where with all to do a callback to the Tinder joke, Hey, you got a second date.

Kurt Elster (25:01):

Well, then the same thing would happen where I would have not been able to, like my brain would have broken again and I've been like, Oh, hi. And then ran away. And I practiced the conversation in my head too. It was very silly. And then still couldn't get it. Still, couldn't keep it together. But I think what's interesting about a brand like Leno's garage is people assume like, Oh, you have an alias celebrity attached to it. Then it's just like instant, overnight success. And it isn't the case. Like certainly that's an unfair advantage for them a hundred percent. It is. But they still have to go through all the same effort. Any other e-commerce brand of that starting from scratch has to go through and like, they still have to go through all the same audience exercises. And I'm sure they're going to get the hookup on some stuff.

Kurt Elster (25:45):

But then on other things, you know, they're going to, they're going to try and charge a gelato tax where it's like, Oh, it's a letter they're gonna try and charge more. Or, you know, like Facebook doesn't care who you are. They're gonna pay the same ad budgets and be exposed to exactly the same algorithm. So it's not like the instant success that you would think it is. Um, and their director of marketing, Chris Walters said all this publicly on my show that like, that's the biggest misconception about a brand about their brand. But I think about like celebrity driven brands

Lucas Walker (26:13):

In general, and we're starting to see this more and more with a lot of critters, especially people blowing up on tech talk and then just launching stores. Do you think that's the future of e-commerce or a larger element of the future than it is now just with the industry growing so much, is that really the future where you need to be bringing your own audience to launch? If you don't have significant capital

Kurt Elster (26:38):

Step one of launching any e-commerce brand, really any business, but any e-commerce brand should be building the audience. If you don't have that audience, what are you going to do? And I think that is like the number one mistake. I see people make over and over, um, new brands at least. And I find it very frustrating. They're like, I've got the best idea. All right, now I've got the coolest designed website and well, we've got this really cool logo. Everything's really slick. Oh yeah. Well, who's your customer? Like, why do they buy, what do they get out of it? How they view themselves. I'm my best customer. Okay. How big is your email list? Oh, we haven't launched it yet. And who are you going to sell to? And they're all nervous. Always. Don't take the password off the site. Nobody could see it. Nobody's looking right.

Kurt Elster (27:21):

Like it's going to be, Oh, look, they're like, we took the password off. There's three visitors. You, me and your mom. So if you're not building that hype in advance of launching and publishing, like part of the problem is launch. I launched my website. Oh yeah. What's your launch plan. I took the password off. I didn't even launch anything. You like gently pushed your canoe into a slow moving river at best. So it's about building hype and awareness. Like first people need to be know you exist. That's hard enough. Like a brand is very much like a mud Gollum. It's just a big lump of clay until someone breathes life into it. Right. It's meaningless. Like my agency's name is ether cycle. It's a stupid name that I picked 10 years ago because the domain name was available. But ah, you start putting branding to it and you start putting content behind it and you start building a community around it.

Kurt Elster (28:13):

Then it starts to mean something. It starts to have an association, but it's all like totally arbitrary. So if you don't put in the work, you don't do the work. You don't build the audience and your messaging doesn't connect. You don't know why they want to buy it. You don't know what they get out of it. You don't know how they sell themselves. How are you going to get anywhere? Right. Like messaging and positioning is the thing that will make or break you. And you have to have an audience to, to speak, to, to talk, to, to build a relationship with before you could figure that out. I think that's the key is like you have to view everything as a relationship building. It is very human and very squishy. Cause you've got like, you know, the idea of, Hey, someone's going to just show up on your website for the very first time and spend a hundred dollars.

Kurt Elster (28:55):

That day is insane. Then be like, well, you know, I, I want to get married. So I'm going to go to a bar and just pick somebody and be like, Hey, you want to get married? Well, that's a signal what you're doing with your e-commerce website. So you've got to build that hype. Like you need, you need a hype man and you gotta be your own hype man. And you have to be building that audience and you're going to start small. It's going to be like friends and family. And then, you know, on down the road, Hey, I've been going. That was quite the, quite the rant. All right, I'm gonna stop talking now. Quite the airing of grievances. Yeah. There you go.

Lucas Walker (29:23):

So two more things I know that we were wanting to talk about. One is entrepreneurs who are starting out and you know, maybe they don't launch, right. They hear, Oh yeah. You know what? It's easy. Just throw some Facebook ads for it, put it on the website and I'll get a ton of traffic. And then there are all these cash advance places, probably shouldn't name too, too many, but where they'll give merchants, entrepreneurs say $10,000. And as long as you keep making sales, like they take a cut of that sale until say $13,000 is paid back. So you're essentially paying a 30% APR loan, which you might as well go upon your jewelry because those are the interest rates or some of them are. Yeah. Oh my God.

Speaker 4 (30:06):

Just for a little bit of context, for anyone who does start throwing store, once you start to get sales, you start getting offers from, uh, pay hell is really famous for calling it PayPal capital to fund your business. And it is a useful tool because when you're a business, less than two years old, or even a lot of times, you have to have some sort of personal guarantee. So these financing tools don't use those and they don't hurt keep charging the interest if you don't pay them back. But the amount that you have to pay to borrow the funds is quite high.

Lucas Walker (30:35):

Like do the numbers. It's like an APR 30% where if you have to pay it back every two months within 60 days, it's if you did that through 12 months of the year, you would have access to say, cause you don't ever have access to more capital. You're always paying it back with interest, essentially it's worded. So it's not doing that, but the rates are just insane.

Kurt Elster (30:56):

30% APR at that point, use a credit card. Aren't they capped at like 25.

Lucas Walker (31:01):

Yeah, but it's not APR because it's a cash advance, not alone.

Kurt Elster (31:07):

So we're really, there's a lot of, a lot of linguistics loopholes we're jumping through to make them

Lucas Walker (31:12):

That's work. Yeah. So it's, it's like, Hey, Kurt, I'll pay you 10 or all. Only 10 bucks. You pay me back 11 and I'll just keep taking a quarter. Every time you sell something. So you don't notice the cashflow, but then, okay, that's great. I've made a dollar, you've done it 10 bucks. And I said, Hey, Kurt, and want to do it again. And you say, sure, then I make another dollar. Unless he would do this throughout the course of the year. All of a sudden I, and every month I made $12 loaning you 10 at a time,

Kurt Elster (31:42):

This spokesman, because you're, you're leveraging debt on a high risk investment. And so it gets easier to spend other people's money, right. It always is. So I think it makes you less risk averse when it's alone, even though like you're on the hook for the loan and you ultimate because of interests, you end up owing more than you borrowed now that's future CURT's problem. It's future CURT's problem. Because I know this idea is going to work in it. Everything's going to work out just fine. I'm incredibly risk averse. I, I have bootstrapped my business and have used, uh, have used credit cards as the is 30 day, 0% interest loans. Uh, that's not for everybody, but if you're like me and excit keeps you up at night, I'm not borrowing money at 30%. I'd never sleep again. Oh my gosh. Whoa.

Lucas Walker (32:29):

Yes. It's, it's a tool in a way that we're a business, but, and uh, Eric panel is going to be on a future episode is he's really good with this too, is I love Eric, but why would you take on debt that you don't need to, when you can do it your way and have the freedom to do it your way.

Kurt Elster (32:45):

I like the, the independence of entrepreneurship. And this is part of my risk aversion. Like if you have a job, you have a single point of failure for your primary source of income. If you run your own business, you can not get fired, right? You own it. No one can fire you and your employers. Then your source of income are your, are each of your income streams. So maybe your business has a retail direct to consumer and it has a wholesale side. And then maybe it has an affiliate income side, like theirs. You will have several things going on in the business to power and drive your income. And that is what attracts me to entrepreneurship is it is. So it really defangs earning a living in the year 2020, because you've got like, okay, I lose one customer. All right. That's not the same as I lost my job. Right. You're barely going to feel that at all. So that's my attraction to cashflow in entrepreneurial businesses. But as soon as you're borrowing money, Oh, it starts to break that system.

Lucas Walker (33:47):

They have a boss, again, same thing with investors. It's when I was running treats happen, we could have grown a lot faster and maybe we should have, we could have done a lot of things differently, but I never wanted to go and take out a lot of money. Because at that point you have institutional investors who owe you money. They don't care about really anything except getting paid back. Of course they should like, they should like, that's their job. That's why they're loaning me the money

Kurt Elster (34:10):

Vilifying the lenders and the investors in this scenario. I'm just saying it's a gamble, it's a tool. And it comes with risk. All investments, carry risk, even spending money on like, you know, in my scenario, if I'm going to say like, man, I'm going to spend 10 grand over the next 90 days on Facebook ads for small business, that that's a lot of money, but like that itself is its own risky investment that I may not get a positive ROI on. I'm not saying don't borrow money and that you should never borrow money. And that it's always evil. I'm not, I have borrowed money before. Like I didn't pay cash for my house. It's a Morgan and borrowing money for that. It's just, you know, go into it with eyes open and have a plan and think hard about it. And they'll say to you, part of it's your personality, like just straight up. I I'm just too anxious a person like I D I don't need this stress in my life.

Lucas Walker (34:57):

I mean, we could keep going on and on, but one last thing that I wanted to, to touch on and you kind of segwayed it. When you said having those multiple streams of income, we both have podcasts. One of the reasons I'm starting this podcast and working with a producer is I don't love a lot of the quality of the podcasts that are just out there right now. What are some of your beasts with podcasts as we wrap up 2020?

Kurt Elster (35:19):

Good question. Well, as a podcast, hosted producer, the analytics and podcasts are so broken. They're really like non-existent and much of it as a best guess. And that's another one where you have a monopoly in that there is a single company, the internet advertising Bureau has somehow become our source of truth for what is, and isn't a legit podcast analytic. Um, and that concerns me a little bit, but yeah, I think like for advertisers, for the producers, I think having those Rogan unclear analytics are problem. As the, as far as like podcasts, I listened to go. I like entertaining podcasts. I listen to fiction podcasts. Mostly I'll listen to news podcasts. I will rarely listen to a business podcast because they are too long and too boring for me. And I'm saying that as someone who hosts a business podcast, so I try to make it entertaining. We try to make it more edutainment to solve that. But really it's just like that, you know, it's based on what my own personal preference. And I think there's podcasts that are over edited. Drive me nuts, podcasts that are under edited. Drive me nuts. I'm very critical just because I host my own podcast that I listen to my own podcast. I hate that one too.

Lucas Walker (36:35):

So in true Festivus fashion, you unleashed the Larry David within yes. Podcasts, ah, too edited, not edited enough. Oh, I don't like the sound of my own voice. I'm not going to listen to mine. Oh, business podcasts. No thanks fiction. Oh, not a good story.

Kurt Elster (36:50):

The advantage to like hating your own work is that you're always iterating on it and revising and try and make it better. I've done 300 over 300 episodes, 325, I think. And episode ones, horrible episode a hundred. Nah, they're much better. 200. Okay. Getting somewhere two 50. Oh my gosh. She's almost figured this out 300 and I'm like, all right, it's still not what I want it to be, but it's so much closer than it was. It's like, you just you're stacking the bricks and everything you do is a skill and you're going to gain experience at it and get better at it. So I think that's like a normal and healthy thing to do. I think the messed up thing would be if I, after 300 episodes, I looked back at episode one and went, that's just as good as episode 300. That should be a red flag.

Kurt Elster (37:36):

If you're doing the same thing over and over, and the quality stays the same, something's gone wrong. Like push yourself out of your comfort zone. And that's also like part of that too, with a podcast, I had horrible social anxiety disorder, horrible. I would sweat profusely at the thought of hosting a podcast, but I pushed myself out of my comfort zone and really like, largely, it's very rare for me to experience social anxiety now five years later, but I was starting from a definitely a disadvantage perspective because of that. And, uh, you know, you'd get better at it over time.

Lucas Walker (38:10):

I think that that's just a really great way to wrap it up. Where can people find you? Obviously, presumably everyone listening to this episode is going to know you, but if they don't, for some reason, where can people find you? Kurt,

Kurt Elster (38:23):

Google may kurta Google Kurt Elster had to Kurt elster.com sign up for my newsletter. And that's my actual email address it comes from. So if you have thoughts, questions, or airing of grievances, just reply to that welcome letter. And I promise I'll read, I may or may not reply. That's probably the best disclaimer. I'm just going to read it and then air grievances to Lucas about it.

Speaker 4 (38:42):

Man, look, look at this guy. He didn't even say thank you, but who says, thinks you don't care? That's pretty good.

Lucas Walker (38:50):

Well, I really appreciate it. Kurt had a blast.

Kurt Elster (38:53):

Yeah, this was a good one. I hope everyone has a good holiday around, uh, around the 23rd. It stays safe and social distances. Now's the time to be vigilant and not give up and really like try and quarantine and self isolate and stay home. However much is practical because we're, we're right at the tail end of this thing. So close. I'm going to be able to go back to Disney world soon.

Speaker 4 (39:29):

[inaudible]

Lucas Walker (39:29):

A huge thing that occurred for joining me during an incredibly busy time of year. If you enjoyed this episode, make sure you let Kurt know in his community, the unofficial Shopify podcast insiders on Facebook, and he wanted to hear more of his insights. You can find his podcast wherever you're listening to it, Make sure you're subscribed. So you catch next week's episode where I chat with my friend and mentor here, Neil, one half of the new births.

Speaker 4 (40:03):

And that bell means

Lucas Walker (40:04):

It's quitting time.

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