w/ Andrew Youderian, EcommerceFuel
Ecommerce Fuel community leader Andrew Youderian joins us to discuss the results of his 2022 ecommerce trends report gathered directly from store owners like you.
We'll give you a unique, detailed look at what trends are shaping the eCommerce landscape and, ultimately, your business.
GUEST BIO: Andrew Youderian is the Founder of eCommerceFuel, a community for 7- and 8-figure brand owners. I'm a member, its a high quality community. Also a podcast host of Ecomm Fuel, and early inspiration for After a few years in the investment banking world, Andrew decided he’d had enough and decided to quit and start his first eCommerce business. He has since sold numerous eCommerce stores over the years and loves geeking out about eCommerce, investing, finance, marketing and community.
The Unofficial Shopify Podcast
11/8/2022
Kurt Elster: Joining us again on The Unofficial Shopify Podcast is none other than eCommerceFuel community leader and podcast host, Andrew Youderian, but he’s not the important part. What’s important is what he brings us today. He has picked the brains via survey, extensive survey, of all the brand owners, seven and eight-figure store brand owners in his eComFuel community and put together a trends report. So, today we are going to discuss the results of this 2022 eCommerce trends report gathered directly from store owners like you, and ideally 30 minutes from now you’re going to have a unique, detailed look at what trends are shaping the eCom landscape and ultimately your business.
Now, the guy who’s going to be bringing that to you, aside from me, Kurt Elster-
Ezra Firestone Sound Board Clip: Tech Nasty!
Kurt Elster: … is Andrew Youderian, founder of eComFuel, this seven, eight-figure brand owner community. I’m a member of it. It is a high quality community. I get a ton of great inspiration and advice from it. He’s also a podcast host. Same name, eComFuel. eCommerceFuel. And that was early inspiration for me for this show. After a few years in the investment banking world, though, Mr. Youderian decided he’d had enough and decided to quit, start his first eCommerce business, and he has since sold numerous eCom stores over the years and loves geeking out about eCom, investing, finance, marketing, and community. All right, we will talk about at least three of those five topics.
Andrew, welcome to the show. Where you been? What’s going on?
Andrew Youderian: Yeah. Thanks, Kurt. I always love coming on and doing this with you. It’s a blast. I’ve been well. I’ve been in Tucson, where I live. Was in Maine about a week ago at a… Some of our family lives almost off the grid, like full organic farm style, like, “Hey, we grow the wheat to make the flour to make the bread,” kind of thing, so that was cool for a week. That was a lot of fun. And just working on trends report, man, since, like you said, I love geeking out about this stuff.
Kurt Elster: So, it’s trends report and just full sustainable home independent farming in New England.
Andrew Youderian: Pretty much. I mean, those go together so closely, right? So tightly?
Kurt Elster: Yeah. I’m just like-
Andrew Youderian: So much overlap there.
Kurt Elster: Peanut butter and jelly.
Andrew Youderian: It was amazing. We’re getting way off topic here, but I’m not really a… I love good food, but you know, I always lived in cities, but it was cool going and seeing… Annie’s, my wife’s aunt and uncle, they don’t have trash. I was like, “Hey, where do I throw this away?” And they’re like, “Oh, we don’t really have trash.” Because they just don’t need it. They just make everything. I ate better than I’ve eaten in probably a decade, because they grow everything. It was cool to see. A lot of work, but I don’t know, and then I think back to us who… our family, who gets boxes in our front door every other day and just generates gobs of recycling that is just… Anyway-
Kurt Elster: I get what you’re saying about it. Yeah.
Andrew Youderian: It was really interesting. Yeah.
Kurt Elster: I think about it. I feel guilty about it every single time I throw something out. I watched this old Modern Marvels episode about the just garbage disposal industry. Now we’re like fully off topic. And yeah, that’s my system is rather than doing anything about it, I just feel quietly guilty inside every time I throw anything out.
Andrew Youderian: Well, that helps a lot. I mean, that’s the largest, the most important thing to do, really, is the guilt feeling.
Kurt Elster: Yeah. If we could harness my guilt as an energy source, that could offset things.
Andrew Youderian: Man, we’d be able to power the world if we could harness your guilt as an energy source. Anyway, sorry, this is the worst. Last time you ever invite me on here for derailing a conversation.
Kurt Elster: All right, so you’ve got this eCom trends report. What is it?
Andrew Youderian: Yeah, so every year I try to come and ask our community, it’s largely members of our community but also a lot of other folks kind of chip in as well, and we surveyed over 600 store owners. Average revenue of the store was about $7 million. Mostly in the U.S., about two thirds in the U.S., but also a lot of owners from Canada, Australia, Europe, and across the world, and just asking them about 50, 60 questions, and then we dive into those questions and try to pull out the most interesting trends, stats, correlations, things like that, so we’ve been doing that… I think this was the fourth year of the report, so it’s fun because we can look at things over time, as well, and yeah, it’s great.
And so, thank you to everyone who’s done it. I’m sure there’s a handful of people who are listening who have, who participated, and really appreciate you doing it because it’s a big ask, and a lot of questions, but it comes up with some interesting insights.
Kurt Elster: When you fill it out, the first thing it asks you is do you run a eCommerce store. And when you say no, it says, “Thank you for your time.” So, I filled it out. I got through one question. I was like, “Wow, this is the easiest survey I’ve ever taken.”
Andrew Youderian: Kurt, your insights were invaluable. I mean, we couldn’t have done the report without you, so thank you so much.
Kurt Elster: All right. We got this one. No. Moving on. All right, sample size, we got 600 stores. It’s U.S.-centric, about two thirds are in the U.S., and then the other third is… It sounded like a variety of largely English-speaking countries. I’m sure there’s others in there.
Andrew Youderian: Yes.
Kurt Elster: $7 million average revenue. And then about 60 to 70 questions?
Andrew Youderian: Yeah. About 50, 60 questions. Yeah. We ask everything from-
Kurt Elster: Okay, we’ll go 60.
Andrew Youderian: Yeah. Yeah, 60.
Kurt Elster: 600 questions. Got it. And is there anything about the methodology here that I should know? I mean, that’s like a big word. I sound smart if I go, “What’s the methodology?”
Andrew Youderian: Yeah. On the low side, I think we stripped out… I’d have to go check the Excel file, but I think anyone who was below 250K in revenue, or maybe 200K in revenue, we excluded just because we wanted to try to get… For things like growth rates and things, when you’re that low it just… It really skews the averages and some of the trends. So, on the very low side, some of those data points were excluded. And tried to be thoughtful about averages and means.
One thing I learned in finance is that man, if you’ve got a… Depending on how you chop and dice the data and outliers and averages or means, you can get data to say almost pretty much anything you want it to, depending on how-
Kurt Elster: Yeah. Lies, damn lies, and statistics.
Andrew Youderian: Oh yeah. Yeah, so tried to be thoughtful about that. From a methodology standpoint, that’s kind of probably the biggest thing to mention.
Kurt Elster: All right, so when I hear that someone has at least… is aware of sampling bias and is at least thinking about it, that is really… That’s all I need to know, is like a best effort was made here. And there was an awareness and understanding of it.
Andrew Youderian: And I will say I do not have… I have a finance background, eCommerce background. I don’t have a statistics background. I think if any PhD student in statistics came in here and actually saw the data, they probably… They might have a small conniption, but in general I think it is accurate and representative, especially in terms of the high level trends, so that’s the disclaimer I’ll throw in there.
Kurt Elster: Yeah. I think it’s like take it or leave it, but there’s always going to be someone on the internet who will yell like, “That’s not statistically significant,” no matter what you do. It’s like all right, the sample size was the entire planet. They’re like, “But what about the phase of the moon? Did you account for it?” Oh, crap. He’s right. All right, so was this all quantitative? Were there any subjective qualitative questions in there?
Andrew Youderian: We did. Yeah. We had some questions about what’s your biggest plans, biggest struggle for the year, or biggest plans for the upcoming year. So, for example, like the year ahead, biggest plans for people was number one, invest in new products. That always seems to be the biggest thing people want to do more of. Number two, get better at marketing. Number three, work on Amazon or get on Amazon. Four, scale the business. And five, expand into new channels.
And so, those we kind of just lump together in broad base categories. So, I’d say 10% were open ended, qualitative, but the vast majority, 90% were quantitative. Revenue, growth, profit margins, conversion rates, that kind of stuff.
Kurt Elster: So, with those qualitative questions, I want a temperature check. What’s the general sentiment here? How are brand owners feeling?
Andrew Youderian: I think they’re feeling a little bit beleaguered in the sense that it’s just been… We were talking about this before we hopped on. It’s just been a rough couple of years. Rough three years. You had COVID, which was amazing for most brands but exhausting, and then you had the year after that with supply chain issues, and Facebook, and all this stuff, which kind of was a gut punch, and now you’re kind of coming to a recession a little bit, although this data was collected before that.
So, I think it’s just feeling a little bit weary, to be honest. I think it was interesting, if you looked at the number of store owners that were considering selling, about half of people, close to half of store owners were either considering selling, had made up their mind to sell, or were either seriously considering or it had crossed their mind. There was only about 43% who said, “Nope, no plans to sell. Zero plans.” So, I think that was a byproduct of A, really good multiples at the time. This was before kind of the M&A market had really kind of cooled of substantially. But I think it was also a function of the fact that man, it had just been a rough couple years and exhausting maybe is better. Exhausting couple years in eCommerce.
Yeah. Worn out is maybe a good way to put kind of the temperature of people.
Kurt Elster: So, fatigued. Battle worn. Beleaguered.
Andrew Youderian: You sound very excited saying all these very negative adjectives.
Kurt Elster: But not belligerent.
Andrew Youderian: No. It was funny. I feel like… We did a couple events after this data came out and got collected, and the number of people who I talked to… Maybe this is contradicting what I just said in terms of people selling, but people were tired, and kind of like you said fatigued, but they weren’t like… I don’t know. It seemed like they still… A lot of them were willing to, trying to figure out how to pivot, how to adjust. It wasn’t a giving up mentality. It was a, “Man, I’m really worn out, but I’d love to just be able to… I gotta figure out how to change my business and my model,” a lot of people, for kind of the new landscape that we live in.
Yeah. I feel like we’re having eCommerce store owner pillow talk here in terms of feelings, and emotions and stuff, but yeah, that’s kind of the sense that I think I got from this and also just talking to store owners.
Kurt Elster: What’s your biggest takeaway other than fatigue post-pandemic?
Andrew Youderian: Yeah, so I had four. If you’re cool with, there’s kind of four big takeaways.
Kurt Elster: Let’s go through them.
Andrew Youderian: Yeah, let’s run through them if you’re cool with that. First one, and this was the one that I think I’ve talked a lot about this, so if people have heard this before, apologies. I’ll try to maybe slide in a few new things that you can take away. But the biggest one, I think one of the most interesting things about a study like this is you have all this data. You can look at what stores are doing the best and you can try to reverse engineer, okay, how are they being successful? How are they able to achieve these levels of success?
And so, we created a bunch of groups. A control group. We had a group that was growing extremely quickly. We called them the rabbits, the rabbit group, very technical. You can tell we’re professionals here. And then we had a third group that was what we called the profitable rabbits, so companies that were growing reasonably quickly but also growing their profits reasonably quickly, as well, and had decent margins. Something like they had to have at least 15 or 20% profit margins and were growing the revenue and their profitability year over year.
And so, we looked at a bunch of different… compared the groups, and where are these groups outpacing? What are they doing to drive these results? And what we found was really interesting. The biggest thing was return on ad spend, ROAS, had zero correlation between these groups. So, if you looked at the different groups, there was… If you were in the control group, that actually was a group that was doing poorly, versus the groups that were doing great, there was almost zero difference. There was literally zero difference in the return on ad spend. If anything, it was actually the groups that were doing worse had a slightly higher return on ad spend. So, what actually drove the difference were things, like the biggest thing was a focus on brand and storytelling as a competitive advantage.
So, the companies that were growing fastest, they were six times more likely to cite that as their competitive advantage. Just off the charts, crazy high differentiator. Much more likely, 77% more likely to manufacture their own product. They had a higher conversion rate. So, it was all these things were really interesting.
And then if you looked at what was setting apart the profitable growing companies, it was fewer things that were… Weren’t as many just that branding and storytelling advantage that were just by far and away just off the charts differentiators, but there was a lot of little subtle things, like they were much less reliant on traffic, on paid traffic. Their gross margin was fatter. This was a big one. They had much… They had probably half the headcount, so they were lean operators. Their employee headcount was 50% smaller than that of other folks. They were less likely to run their own warehouse, which I thought was interesting. They were more likely to outsource that. And they had a slightly higher conversion rate.
So, it was yes, the ROAS also didn’t change, but the ones that were profitable also had this focus on leaner operations, outsourced fulfillment, smaller headcount, fatter margins, less paid traffic, things like that. So, that was the biggest thing.
Kurt Elster: Interesting. All right, so I’ve got ROAS is the thing we obsessed over forever, and really specifically Meta ads, and what we’re seeing in this data set is the brands that were focused on product and brand, so they’re manufacturing their own goods and they’re attaching that to storytelling, where they’re really owning messaging and communication, but having a narrative, telling a story, I have noticed that too. The brands that can do that where they have in some way found their voice, right? That becomes a very serious competitive advantage and it's hard to compete with stories.
And then interesting that they’re running, but like yeah, they’ve got that stuff in house, but then the stuff that goes external, 3PL, right? We’re not gonna bother with fulfilling ourselves. Interesting. A move toward efficiency. And then focusing on efficiency and cutting the headcount. I did not expect that part.
Andrew Youderian: I think that the arc of logistics, and supply chain, and manufacturing, early on you could hack distribution. You could hack marketing online, right? Or it was easier to hack marketing online. And you could drop ship products. You could make that work for a while. Then that stopped being effective and then you had to manufacture your products, right? Well, that worked for a while. But then all of a sudden a lot of people, even though that’s a hard game, a lot of people figured that out. It’s not as hard. It’s not that hard to get manufacturers to make you stuff.
And so, now even if a lot of the stuff is very similar, now it’s much more about marketing, and branding, and presenting the stuff you have in a light that really resonates with people. So, you’ve gone from just marketing, to actually have to create the stuff and market it, and then now it’s you have to elevate your own stuff above everyone else’s manufactured products, so yeah, it’s been interesting to watch that evolve. That’s where the storytelling I think has become so paramount.
I don’t know about you, Kurt. I’m in this world a lot and I like to think I’m above storytelling, I’m above branding, and I’ll be like, “Oh, I’m a value guy. You’re not gonna get me to pay double or triple for this stuff with nice packaging.” But I’m just as much of a sucker for it I think as anyone else, even though I like to think I’m not, and it’s super effective.
Kurt Elster: I would like to think that I can see through it. I can identify it for what it is. And in being so deep in it, I am more susceptible than anybody. I know it’s happening, and I still am like just take my money. Send me the thing. It’s fine. I know what’s going on here but it’s cool. You got me.
Andrew Youderian: Well, sometimes too it’s like you see just a gorgeously done product with great branding, and great packaging, and just it’s a cohesive… So, you feel like it’s a premium experience. If you’re like, “Man, I know how hard this is to do. I appreciate it. Yeah, I’ll pay you for it.” Maybe that’s part of it, too.
Kurt Elster: You’re right. You see it and you have an appreciation for it, and I think that’s what makes you more susceptible, and you go like, “I want to be a part of that.” When you see it, it’s really put together and you can… I think the importance of this story is that as people, as humans, that’s what we connect with, and so that immediately adds this emotional component to it. And then when you combine it with it just looks really good, and polished, and professional, and I think it’ll solve some need, or it’ll make my life easier, it’s just gonna make me look cool, or it’ll be a great gift, whatever it is, there’s that emotional component to it that you just can’t… Without story, how do you add emotion to product? It’s very tough.
Andrew Youderian: Yeah. Exactly. So, that was the biggest thing. The second thing I thought was fascinating from the report and the findings was that I think we’ve finally hit what I’m calling peak Amazon. And so, what I mean by that, every year for about four years in this report I’ve measured the percentage of merchants selling on Amazon and also the percent of revenue, aggregate revenue that comes from Amazon. And for the first time ever, last time I did the report that was kind of plateauing and predicted that we’d actually see a decline, and we actually did. So, it wasn’t a huge decline, but for the first time ever the percentage of merchants selling on Amazon dropped.
So, it used to be 56%. Now it’s 53%. And the aggregate revenue via Amazon also dropped, as well, so it went from about 28% to about 26%. So, not like an earth-shattering move, and I don’t think Amazon’s going anywhere anytime soon, but it was really interesting seeing that inflection point start to head the other direction. And interestingly enough, also all of the… Most of the metrics when you look at performance metrics of brands that don’t sell on Amazon versus those that do sell on Amazon, the brands that don’t sell on Amazon, they’re growing revenue faster on average. They’re growing their income faster on average. Both of those by a wide margin. Their gross margins are a little bit lower but not much and their net margins are meaningfully higher.
So, all that to say I think… I mean, we don’t have to repeat all the headaches people have had with Amazon over the last couple years and why this was the case. I think a lot of people listening probably have a sense of why that is. But I think that has finally caught up to Amazon and a lot of brands going forward are starting to reconsider… Yeah, hey, does this make sense? And I don’t think they’re fleeing the platform, necessarily, but I think the people that are coming on board maybe are starting to think a little more carefully about like, “Do I really want… Is this the business model I want to create?”
Kurt Elster: And the pushback on Amazon is like they are… They’re difficult to deal with and they create a culture of you play in their sandbox by their rules and you pay for the privilege to do it. And so, really, there’s a lot of control over the brand and the experience that you lose, and you don’t own the customer. But it’s this marketplace that has the most eyeballs, like everybody is shopping on Amazon, and so I see the attraction. It’s kind of a double-edged sword, isn’t it?
Andrew Youderian: Oh, totally, but I think going back to branding and storytelling, you can do it on Amazon but it’s much harder to tell a great story and have a great, cohesive brand experience on Amazon versus your own website. And I think… I’m curious about you, Kurt. I’ve talked about this with some other people. When I look at my buying behaviors on Amazon, I buy one of two things. I buy really cheap products that are commodity items, like, “Hey, I need very cheap bike lights for my bike that I want to spend $20 on.” And if they break in six months, it’s not the end of the world kind of thing. So, very cheap commodity-based items, or I buy very high, very well known, national brands that… Maybe Nike. I bought some basketball shoes from Nike the other day on Amazon. Nike shoes, basketball, I know them, trusted brand, okay.
Anything in the middle between those, interesting, unique products, more niche products, kind of exploratory things that I think are interesting, bought like a Jolie showerhead the other day for my wife, Annie. That was something, I bought that partially because I heard it from someone, Nik Sharma, when he was talking at our event in Charlotte, but then also I went to their website and just it was beautifully done. It was branded well. They talked about all the stuff it pulled out of the water. That’s not a product I would have bought and paid a premium price for on Amazon. I just wouldn’t have.
Anyway, so I think at the ends of that spectrum, Amazon’s gonna continue to do really well. I think anything in between, I think they’re gonna increasingly struggle to get those types of purchases.
Kurt Elster: Yeah. You’re right. Interesting. I hadn’t thought about it that way, but my Amazon, and I scrolled through my Amazon orders real quick. It’s like all commodity consumable purchases. It’s like if I’m getting batteries, I’m buying 48 at a go from Amazon. But then outside of that, I’m buying basics. Beyond that, I’m gonna go direct to the brand. And it’s not a thing I was aware of or really thought about.
Andrew Youderian: Like your shirt right now, and not that I have any type of ahead knowledge on this at all. I’m playing completely by the rules. But did you buy that on Amazon?
Kurt Elster: No. I actually purchased this last Black Friday at Eddie Bauer. In person.
Andrew Youderian: Yeah. For those of you who can’t see, Kurt is wearing a phenomenally good looking kind of flannel-ish Aztecy very cool shirt.
Kurt Elster: I was getting Southwest vibes out of it. I feel very Southwestern.
Andrew Youderian: Oh yeah. I feel like I should be wearing this shirt. We’re reversed here.
Kurt Elster: Yeah. You’ve got that black t-shirt that just goes with the Midwest malaise of just being here through the gray winter. I love that look in the winter. This, the bright color is very Southwest. This is to keep me from getting the seasonal affective disorder. I’m just trying to inspire myself here. And it’s like dazzle camo. I can confuse predators with this.
Andrew Youderian: Yeah. I’m not quite sure where to look. I feel like my eyes are darting all over the place, so apologies for not maintaining eye contact here.
Kurt Elster: All right, so Amazon, not necessarily table stakes anymore. People reconsidering. But still a little over half our sample, our stores, were selling on Amazon.
Andrew Youderian: Yeah. And I think we’ll see that trend continue. Number three, this is on pricing. So, the biggest, biggest takeaway was you need to raise your prices probably again, and I think a lot of people have been raising prices with inflation, with supply chain stuff going up, so it’s something I think people have already been doing, but I do think also people underestimate A, the power of it, and B, they overestimate the negative downside when it happens. And so, I asked people. I said, “Hey, did you increase your prices?” And of the people that increased their prices, 85% of them had a positive outcome. So, what that means, let me break that down. People that raised prices, about 62% saw no change to revenue. So, what that means is prices went up, probably fewer orders, but those orders are generating more per order, AOV goes up, and so the revenue stays the same but at a higher margin, which is a win. A big win, in my book.
And 14% saw their revenue, or excuse me, 62% saw no change. 24% saw the revenue actually increase. So, higher revenue at a higher margin. Huge win across the board. Only 14% of people saw their revenue actually decrease. And even of that 14% that I’m saying is a negative outcome, there’s a very good chance that even a large portion of them still saw their profits increase because every incremental dollar, if your margin, if you increase prices, and this is especially more acute if your margins are lower, if you have profit margins of… I’m gonna try to do math on the fly here. I’ll probably butcher this. But if you increase, if your margin is 50% and you increase… I’m gonna butcher it. I’m not even gonna try.
But a lot of those people who had the revenue-
Kurt Elster: I wouldn’t have gotten it either.
Andrew Youderian: Yeah. Thank you. A lot of those people that had their revenue decrease, maybe their top line went down, but their profitability still went up because their margins were up. Anyway, so the big thing that I took away with this was just raise your prices, because 85%, 90% of the time it’s going to result in a positive net result for your business. And the other thing, kind of the corollary to this was suppliers raised their prices. The average supplier price increase was about 15%. But the average merchant price increase was only about 11%. So, store owners are not increasing their prices at a rate that is keeping up with supply chain price increases, and we actually saw that in the net margins for business owners this year. It went down. Partially because people aren’t raising their prices in lockstep with their suppliers, probably because of fear.
Anyway, takeaway, raise your prices. You almost certainly… I’m a gambling man and it’s a good bet.
Kurt Elster: With looking to raise prices, and you’re saying supplier costs went up, another thing that’s gone up is shipping costs and fulfillment costs. Did you do… Do you have any info on how people are treating shipping rates and free shipping?
Andrew Youderian: Yeah. We actually did. It was kind of interesting. And let me pull these. It’s been a while since I looked at that data. Yeah, so we actually chatted with Intelligems. They’re a company that does pricing research. They help people kind of look at very… It’s like kind of Klaviyo for pricing. How do you scientifically make pricing?
Kurt Elster: Yeah. It’ll do split… I’ve used it. It’ll do split testing on product pages and split testing of shipping rates. It’s cool.
Andrew Youderian: Oh, cool. Okay. Yeah. Nice. They’re a great company. Disclosure, I’m an investor in them. But I really like what they’re doing. And they talked about, they said in terms of free shipping, they actually said that 80% of brands found that adding in a free shipping threshold or raising their free shipping minimums was a profit accretive decision. And so, I think people are… Prices, they actually found that people were a little bit more price sensitive in terms of if you just raised prices, like in the past, so I think still raising your price is a really good decision for most brands. They found that year over year, consumers were giving a little… The increases in prices were a little bit… You couldn’t push them quite as far as you could before because people were more price sensitive. But they did find that if you raised your free shipping thresholds or your minimums, that was a great way to boost profits. Maybe even more effective or as effective a strategy as raising your prices.
Kurt Elster: And I think… Yeah, so if I raise my shipping rate threshold, I will gain more profit than it will cost me in conversions.
Andrew Youderian: Yes. Exactly. Yeah. For most people.
Kurt Elster: Test it. Don’t just take that like, “All right, we’re gonna double our shipping rates and hope it works out.” Be thoughtful about it. But I think for the most… And I’m seeing this with our own clients, is a lot of people just going, “Hey, we’re dumping free shipping.” Or our free shipping thresholds are going way up. And then free shipping can become a promo during November, December.
Andrew Youderian: Yeah. Exactly. As opposed to having to just totally get your pricing, so that makes sense. And then container prices, I think they were in the maybe $15-$16,000 for a 40 foot, but those have come down dramatically in the last handful of months since we did the report, so I think those are maybe in some cases even sub-10 at this point. I haven’t been tracking them quite as closely. But shipping was a big deal, but thankfully it’s started to subside on the importing shipping container rates.
Kurt Elster: So, do you think we’re not gonna see Shipageddon again this year? I hope not.
Andrew Youderian: I don’t think as much. No. I think we’re gonna have… I think prices are coming down on that. I think backlogs at the ports are starting to clear up a little bit. Thankfully, no. I don’t think that’s gonna be as much of an issue this year.
Kurt Elster: Okay. Good. That was not fun.
Andrew Youderian: Yeah. It was rough, for sure. Those were some of the big takeaways. Let me give you three or four super rapid fire ones. It was very interesting seeing the percentage of people that paid traffic, if we looked at someone back in 2019 versus today, the number of brands that are reliant on paid traffic… Back in 2019, the number one source of… The number of brands saying paid traffic was their number one source of visitors was about a third of people and now it’s about half.
So, a lot more brands are heavily reliant on paid traffic than they were before. We looked at marketing channels, which marketing channels got more or less popular, and the ones that got more popular in 2022 were Google AdWords. I think it was a beneficiary of some of the Facebook debacles. SEO. Amazon ads became more popular. Influencer marketing jumped the largest amount from the last time we did the report. SMS and wholesale also did, as well. Facebook ads declined in popularity and blogging declined in popularity.
We also looked at the most effective marketing channels, so these aren’t like hey, who do people use the most, but who do people use the most… Who do people say is… What channel is the most effective for people? So, of the people that say, “Hey, we use Google ads,” what percentage of those say Google ads is a really great performing channel? Google AdWords jumped up.
Actually, let me step back. The number one most effective marketing channel in 2019, and also for 2022… Kurt, you want to guess what it was?
Kurt Elster: I’m gonna go with I have no idea. No, I’m not guessing. I’m not doing it.
Andrew Youderian: Not guessing. Okay. Okay.
Kurt Elster: It was right in front of me when you said it, and so, knowing what it is, I cannot.
Andrew Youderian: Oh, okay. Yeah. Well, honest man. So, you know, Amazon ads. Amazon ads has been the most effective marketing channel in terms of just how much people get out of it. So, Amazon, that was number one. Google AdWords was the second most effective, up last year from number four. Email marketing was number three this year. It dropped a spot. SEO dropped a spot. It’s the number four. And Facebook ads was kind of at the bottom of the pack at number five this year.
Kurt Elster: It’s funny that blogging went… is number eight, it went down, and SEO is number three, it went up. Really, those things feel like they should overlap.
Andrew Youderian: That’s true. Yeah. That’s a good point. I think when I think SEO, I think like… Yeah, that’s a fair point. I wonder if blogs, I wonder if part of the blogging part, though, is like people having eCommerce-related blogs, or content, because SEO is like homepage, landing pages, product pages, all of that kind of stuff. But you’re right. Those do overlap, so that is kind of interesting that they’re diverging.
Kurt Elster: It’s content marketing.
Andrew Youderian: Yeah.
Kurt Elster: Do we have any thoughts on how people are approaching content marketing? I feel like 2021 was the year where we went like portrait video is the cornerstone of content strategy.
Andrew Youderian: Yeah. I feel like people are just not… I mean, rise of TikTok, YouTube, a lot more people are getting into video, it seems. We also asked what’s the marketing channels with the most future potential. TikTok was number one. Influencer marketing was number two. SMS was number three. YouTube was number four. So, of the four channels that people said that have the most future potential, three of the four are heavily related if not entirely related to video. So, TikTok and YouTube, of course. Influencer marketing is probably I would say 80 to 90%... Maybe not 80, but largely video based, and maybe text. Maybe image for Instagram. But between video and Instagram it’s probably 90% of influencer marketing.
Kurt Elster: For sure.
Andrew Youderian: So, yeah, I think people are doing less blogging because people’s attention spans are down. I also think SEO has just gotten harder. It’s gotten more crowded. Not that it’s gone or dead by any means, but… And also, I don’t know. It’s interesting. You wonder too how much SEO is still working, but I think we’re all very immune to being caught up in the new thing, what’s working. Oh, are we missing the boat? Could our business be a $40 million business if only we would get on TikTok earlier? Sometimes it’s hard to stick with the old things if everyone’s flocking to something new.
Yeah. I think content is… No news here for people, but kind of moving a little bit away from written, at least in terms of attention, and going towards video.
Kurt Elster: I’m curious to see how that’ll play out in like five years from now. Of course, five years from now it’ll be… It’s like, “Well, don’t you have your Apple contacts so we can go in the Metaverse and hang out with Zuckerberg’s cyber self?” It’s hard to predict the marketing technology five years into the future. But I suspect we’re gonna see… You know, the pendulum swings, and so I suspect we’ll see people going back to some traditional stuff like blogging, because it’s a very evergreen strategy for generating SEO and qualified traffic versus like TikTok, and portrait video, and Instagram reels, where it is so fast, and it requires so much content to go into it.
Andrew Youderian: You understand this very well as the fellow podcaster. Podcasting is an amazing medium to create a relationship with people. It’s a horrific medium to create ongoing traffic that sticks around and gets picked up by the search engines because it’s all text based and just like the video stuff, A, it’s hard to index. Google can index it probably, but it takes more work and it’s harder to index. B, you can’t scrub through it as quickly. If I want to go and find something really fast, if I want to update, learn how to scrub my email list, and I got an afternoon to do it, maybe I’ll go listen to an hour and a half podcast about it. Probably not. I probably want to go look at a very detailed, concise blog post that goes through the five steps so I can dive in quickly.
Because of those reasons, you have to keep publishing it out, and pushing it out. Same with TikTok. And YouTube’s probably a little bit better, but yeah, for all those reasons I think you’re right. I think there’s a lot of… We were talking about this in the ECF forums recently, how some people were asking for a lot more video content, and most people were like, “I don’t want a lot more video content in the forums.” It’s hard to get through quickly and there’s definitely some downsides to it, too. So, I agree. I think we’ll probably see a little bit more of a reversion to the mean of blogging and written in the future.
Kurt Elster: And you’re a finance guy. You asked for key performance indicators. You’ve got financial KPIs here. Walk me through some of those as we’re getting to the end of our time together, but I gotta know.
Andrew Youderian: Yeah, so we looked at kind of a bunch of different performance. Average revenue growth, income growth, gross margins, net margins. Average revenue growth this year was about 34% across the board. Average income growth was 24% across the board. And it had come down from kind of 33, 31 in the years before. Gross margins went up a little bit, which was… Well, very modestly. About 45%. And then average net margins were… They actually dropped like I talked about earlier with people raising their prices less than their suppliers. Net margins actually dropped meaningfully, so that went from 18% to about 16%.
Conversion rate came down too, from about 3% to 2.5%. Throwing a lot of numbers of people. And then we looked at kind of all of those metrics, as well, across different business types. So, are you drop shipping? Are you manufacturing? Are you private labeling? As well as different competitive advantages. We asked people… I thought this was actually some of the more interesting data we collected for the first time this year. We asked people why are you able to do well, what is it that makes your business special and able to compete? Are you amazing at paid marketing? Do you sell at the lowest price? Do you have a proprietary product? All these kind of things.
And what I thought was interesting was on the performance by competitive advantage type, again, going back to that branding and storytelling, the people who reported branding and storytelling was the primary reason they were able to do well just outperformed on almost all the metrics. They took the top stop. They had the highest gross margin, the highest net margin, the highest revenue growth, the highest income growth, and their conversion rate was almost… I think only one other company beat them on that and it wasn’t by very much. One other competitive advantage.
So, that’s a lot of numbers. I don’t want to totally give people brain fog here with just spewing financial stats, but those were some of the highlights.
Kurt Elster: And so, if we’re thinking of like… What’s the common theme here? The common thread to a successful store. What does a successful store in 2022 look like? It sounds like they’re lean, so there’s a focus on profitability, which I think cashflow is king when you’re dealing with manufacturing and inventory. These people are manufacturing their own product. They’re outsourcing the stuff where they see all right, I can’t add value here, so a 3PL, and they’re really good at storytelling, which that speaks to they’re good at creative, and content, and they have a vision that holds the whole thing together. That’s what I’m hearing.
Andrew Youderian: Yeah. I’d say two biggest things, you want to launch a brand or kind of level up your brand, get really good at branding and storytelling and cut the fat in your business, of which there almost always is some that you are not taking a hard enough look as you should at. So, yeah, I’d say it boils down to those two big things.
Kurt Elster: Okay. If I want to get this report for myself, go through it, where do I find it?
Andrew Youderian: Yeah. Go to eCommerceFuel.com/ecommerce/trends. You can check it out there. You can also just go to the eCommerceFuel.com and go to the content tab at the top and go down to trends. Trends report. You can find it right there.
Kurt Elster: And I will include both of those links in the show notes. Tap or swipe up on the show art. Mr. Youderian, where can I learn more about you? Where can I find you?
Andrew Youderian: Yeah. I’m hanging out at The Owls Club tonight if you wanted to come down for a drink. Is that what you mean? We’re gonna hang out together?
Kurt Elster: It would take me a little while to drive there.
Andrew Youderian: Well, you’re already-
Kurt Elster: Normally, I would take the jet, but I let my kids borrow it.
Andrew Youderian: But you’re already dressed for the climate, so that’ll save you some time, right?
Kurt Elster: I don’t think that’s how that works.
Andrew Youderian: Anywhere, or you can find me at eCommerceFuel.com is the website and the community, so it’s the community for seven to eight figure store owners. You can find me if you’re a podcast listener, which of course you are unless you watch things on YouTube. The eCommerceFuel Podcast. Been doing that for a while and love just talking, geeking out eCommerce, talking with store owners, all this kind of stuff. I’m on Twitter @Youderian, which you’re gonna be horrifically… It’s a hard thing to spell, so Y-O-U-D-E-R-I-A-N. And those are the big places I hang out, so…
Kurt Elster: I’ve got all of that in the show notes. And you know what? I hang out there too if you’d like to tap into a brain trust of similarly skilled and experienced eCom owners. Check out Mr. Youderian’s community at eCommerceFuel.com. This, I’ve learned so much here, and it’s great to have things I noticed and felt but you can’t say it’s like… I can’t see a trend with three people and go, “Well, that’s for sure true.” But then to see those same things reflected in a sample size of 600 across all these different stores, of course I like confirmation bias. Very exciting to have my own thoughts and feelings validated for me.
But tons of interesting stuff in there and I am going to keep going through this report. This has been really valuable. Thank you so much for putting it together.
Andrew Youderian: Yeah. Thanks for having me on, Kurt. It’s always fun to come on and talk shop, banter a little bit, and always love it, so thanks for the invite.
Kurt Elster: Absolutely.