Was going to make this blog post earlier but edzwoo's post beat me to it. Finally got back to the suburbs. Living in a pretty nice area right now. Rooming with edzwoo in a two bed two bath condo. It's 1500 sq ft and one of only six units here with a terrace. There's a sundeck, pool, gym, two hot tubs and a running/bike trail through the forest preserve across the street. If you read edzwoo's blog then you probably already seen some of these pictures. It's really nice to be back, seeing a lot of friends from high school who are in the area and honestly I forgot how much I love hanging out with them. Friends have been crashing on the couch pretty much every single night. Great places to eat, been just eating out every single day. Only had two meals at home in three weeks. Going out to bars every chance I get, just having a blast ever since I got back.
Been working 50-60 hour weeks, 6 days a week, trying to set things up in the warehouse. The hard work is paying off because after only 3 weeks we're already doing 30-40% more in sales than we were before we left. But I'll talk about that in another post. Time for some brag pictures.
tl;dr life is good
living room
edzwoo's room
my room
Herman Miller Embody
30" monitor with 5.1 speakers, also mini fridge is filled with nothing but beer
Business has been really good. We've already grossed ~$550,000 this year and we're on track for $2-$2.5 million by the end of the year. Once August hits we're going to be swamped again with holiday sales. Definitely dreading the amount of work that's coming up. Last year, during the weeks before Christmas, I worked 18 hours a day for a month. This year will probably be no different so I'll be sure to stock up on coffee and five hour energy drinks.
Going to have to hire some official employees soon instead of just paying Acckerman and another friend to do the manual work. Also probably going to need a new photographer because our current one is thinking about a job in New York. I have no idea how the hiring process works. Will have to consider things like health insurance, overtime pay, workman's compensation insurance, running background checks, reading résumés, and whatever else we'll need to do to hire someone. We plan on talking to a lawyer soon to figure all this out.
We also plan on hiring a few employees who can do technical stuff a little later on. Right now edzwoo and I have to do things on a daily basis that we can easily pay someone else to do. But these tasks will require some technical knowledge and a ton of training because what we'd need them to do is really specific. Once we have these people we're going to get a manager to just oversee everything. The plan is that by 2013 or 2014 everything will be full automated by our employees and edzwoo and I won't have to come in to the office anymore. We'd just be making the more important decisions, attending trade shows and just living it up.
We're going to be heading back to the suburbs in early-mid June. It'll be really nice to get out of Champaign-Urbana. I've been here for five years now and I'm pretty sick of this area. It's been fun but I'm ready to get out of here. Really looking forwards to hanging out with friends from high school that are still in the Chicago area.
We're leaving because our lease is about to end so we found a nice warehouse to move our business to. edzwoo's brother used to work in real estate and he hooked us up with a friend of his who's a commercial realtor. We drove back two weeks ago to check out some warehouses with the realtor and ended up picking one that's actually right next to where edzwoo's dad lives. The warehouse was somewhere around 6000 square feet, had plenty of office space (enough for maybe 6 or 7 people) and a ballin kitchen area which edzwoo really liked. The warehouse was newly renovated so it looked really nice. The place was owned by CRP Holdings, a huge and well established real estate company. Having a large landlord is always a plus because they're financially stable and have efficient procedures to handle problems tenants might have. We were pretty set on the place but we thought that the price was somewhere around $8/sq ft. It turns out the property was actually $11.50/sq ft, $21,000/year more than we expected.
Nice as it was, we just couldn't lease the place because there were other warehouses of the same size that went for a lower price. We decided to go with a 5200 sq ft warehouse at $7.50/sq ft instead which comes out to be ~$40,000 per year. It wasn't nearly as nice and the landlord is much smaller so there was some risk involved with that. We let our realtor know about our decision and he actually takes this information and gives it to CRP Holdings (the first landlord). They in turn offered us a 6200 sq ft building at $6.45/sq ft. WHAT? Talk about unexpected. This was a much better deal. The reason CRP offered it to us at $6.45/sq ft is because they saw what our realtor sent them and they came up with a price per square foot that would also end up being $40,000 per year.
The 6200 sq ft place is a little beat up but there was no way we could pass it up for that price. We got the license agreement today so we should have everything finalized pretty soon. Never thought I could be this excited about a warehouse.
2011 was a pretty good year for our company and we're really excited about what will happen in 2012. Despite eBay fee increases and new restrictive selling policies, we still came pretty close to our sales goal. This was our first year as an official S-Corp and we got a pretty strong start. We branched out onto Amazon in October which gave us a nice 100k in sales for the holiday season. Overall, for 2011, we did $948k in sales which is just under our $1 million goal.
There were a lot of roadblocks on the way. Mainly rising eBay fees and new policies that really restrict the way we operate. PayPal decided to hold $20k of our money hostage for no real reason. Amazon is increasing their fees in the first quarter of 2012 as well. Along with a hundred other issues that came up over the last year that whittled down our profits. Early in the year we predicted that we were easily going to do over $2 million in sales at a ~50% higher profit margin than our current profit margin. But by May, with all of the changes on eBay, we knew that wasn't going to happen.
However, $948k is still pretty good by our books and our current profit margin, although a lot less than it was at the beginning of the year, is still more than enough to keep us motivated. We got a trade show in Vegas coming up in March and by the end of August, we'll have moved into a permanent location either in the Midwest or in California. Once we get things going, we're going to start importing directly from China. There are a lot of things we're excited for in 2012 and although there's definitely going to be a lot of unpredictable setbacks, we're hoping for at least $2 million in sales by the end of 2012.
Looking back at 2011 I realize that although there is still a ton I don't know about the business world and e-commerce, it's unbelievable how much I learned over the last year. edzwoo keeps saying we should write down what we know so it would be easier to train new employees in the future and who knows, maybe in 30 years write a book about our experience
I remember buying our first storage shelf about a year and a half ago to help organize our products. We were getting to the point where we just had too many boxes lying around and needed a better way to store our products. This was when we had less than $3000 in merchandise so one shelf was enough at the time. After assembling the shelf and putting some stuff on it, I took a few steps back to get a better perspective of what I just did and man, I felt SO legit. That was when I started to feel like what we were doing wasn't just a part time thing (I was still in college at the time) but rather something I could do as a career.
A few months later we had a CPA on our payroll and a lawyer setting up the S-Corp for us. I thought having to buy storage shelves for business purposes was pretty sweet but getting incorporated was really amazing. We were now a legal entity and we even had shares of stock. It was pretty awesome.
A few months after that edzwoo and I flew out to a trade show in New York. Felt pretty legit handing out business cards and wearing a badge with our company name on it. After a day or two though, we realized that we were one of the bigger companies there. We were actually bigger than a good number of distributors there too. I don't think anyone there took us seriously though because of our age. Most of the buyers there would inquire about products in quantities of 10 or 20. Because the way we operate requires that we move products really fast, we usually purchase items in the hundreds and thousands. And usually when you purchase in those quantities, wholesalers will give you a price break or a discount of some sort. But very few of the sales reps at the show knew if they could give us any price breaks so we couldn't tell if certain items were worth purchasing. Either way, it was in New York and we had a blast.
I know how everyone on LP love charts and graphs, so here you go
eBay - the red bar isn't accurate and for 2010, we didn't really focus on the business so it's not a very good comparison
I know it's been a while since I've written anything about the start-up of the business I run with edzwoo. To be honest I just didn't really know what to write about. From where I left off last time, a lot has happened but most of it is administrative stuff that probably wouldn't interest you guys very much. So instead I figured I'd talk about the house I just moved into along with what's happened over the last couple of weeks. If you read edzwoo's blog post you'll know a bit of what's going on.
I moved into a house with edzwoo, acckerman and a friend from high school at the beginning of August. It's a four bedroom, 2.5 bath, 2600 square foot house. edzwoo and I rented out the house for the sole purpose of running our eBay business. We figured we would use the entire first floor as storage and hoped that it would be enough space to last us for the year. We were wrong. This is our house two weeks after we moved in.
We purchased somewhere between 10,000lb - 15,000lb of inventory since we moved in and we're bringing in around 2,000lb - 4,000lb worth of inventory each week. We're at the point where we actually have to start storing things in our backyard. It's pretty likely that we'll need a warehouse soon. The only reason we decided to rent out a house instead of a warehouse in the first place is because edzwoo and I are pretty lazy and wouldn't want to drive to a warehouse every morning. We also don't plan on staying in Illinois permanently. If things go as planned, by next August we will be somewhere close by San Fransisco because that's where a lot of the major shipping ports are located. We would be able to directly import products from manufacturers in China and Pakistan instead of having to go through wholesalers in California. Pretty much all legit wholesalers are located in California because of the port locations and the cost of freight transport from California to Illinois accounts for 20% of our total inventory cost. Because of this, it didn't make much sense to us to invest in a warehouse, set up industrial sized shelves, purchase pallet jacks, etc if we're just going to move after a year.
We also recently transferred our proprietorship to a S-Corp which greatly limits our liability if we are ever involved in a lawsuit. Also, edzwoo and I each received 500 shares of stocks which I think is pretty awesome. You gotta feel pretty legit when you can say that you own your own company and it issues stocks, even if the stocks are not public. So the whole process of forming an S-Corp costs less than $300 if you fill out the application yourself. Our lawyer recommended that we just file the documents through his firm so he can take care of all the paperwork and handle the incorporation process. He estimated the bill to be around $1000 which didn't seem bad but he ended up charging us $2500. We got value-towned pretty hard there. Our accountant is also charging us $950 to go through our transactions for the last six months and integrating all of that into Quickbooks.
Well, that's about it. Holidays are coming up which means we're going to get a ridiculous amount of sales. From mid October to mid December last year we had so many sales to process it nearly killed us. I stayed up for three days working on eBay stuff and studying for finals. Hopefully we will be better prepared this year.
Finished my last final yesterday, graduating this Sunday. Feels awesome to be done with school, although I'm going to miss a lot about the college life. Finally have some time so I figured I'd write the next installment of my business story.
This is a continuation from my last blog post about how I got into e-commerce. If you didn't read my last blog, I basically sold coupons on eBay, made some decent money, then my account became suspended. I'll pick up where I left off.
----------------------
When I received the suspension, my account had almost 16k feedback and was worth $1k - $5k on the internet black market (yes, it exists). However, the value of my account doesn't even compare to the fact that there was still so much money to be made from the coupons and I was basically excluded from the market. I purchased AuctionStealth and joined AskPin to learn how to make a new account on eBay after being suspended. eBay actually has some very impressive multi-account detection methods. For example, if you open an email sent by eBay, there is always a hidden picture somewhere in the email that your email client has to download off the eBay servers. By doing this, eBay is able to track which IP address you are downloading the picture from and essentially they will know which IP address you are using to read the email. So if I opened an eBay email sent to my new account while using the same IP as my suspended account, eBay will know that both accounts are under the same IP address and that I created a new account. So to get around this I created a completely new identity. New bank account, new PayPal account, new credit cards, new address, new IP, new name, the works. It worked for about a month and then my new account became suspended again, I have no idea how they figured me out. I made a third account but this time I was suspended in less than two weeks. I was pretty devastated at this point.
Nothing happens for a couple months. I'm making some money here and there with blackhat methods, but nothing concrete and nothing that gave returns nearly as high as my coupons did. September rolled around and with midterms looming in the upcoming weeks I was focusing more and more on my studies. As the first semester of my junior year came to an end, edzwoo made a decision that completely changed his life and mine. He bought a $1 Airsoft gun (cue dramatic music). Even though edzwoo had been much more involved with poker than he was with e-commerce, there were still a few wholesalers that he had accounts with. One of them sold really cheap Airsoft guns. We had talked about getting some Airsoft guns for fun and since they were only a dollar each, there really wasn't a reason not to get them. So edzwoo spends something like $5 on two Airsoft guns, when they arrived we could tell that these guns were complete crap. They weighed as much as a plastic fork and were so inaccurate that you'd have a better chance of hitting the target if you just threw the BB pellet instead of shooting it. Regardless, we set up some coke cans in the living room to shoot. Our third roommate joined in and surprisingly, we had a LOOOOOT of fun shooting random things in the apartment. Right away, I decide that I have to get my own Airsoft gun (and of course show Ed up by buying something that's a million times more awesome than his guns).
After doing some research I decided to go with the UHC M1911, which is an amazing pistol and for anyone that was interested in purchasing an Airsoft gun for the first time, this is the one I would recommend. The gun is nice and heavy, extremely accurate and a 1:1 scale replica of the M1911. For about a month, everytime my roommates and I were in the kitchen heating up food, while we waited we would just pick up a gun and shoot some cans. Our floor was covered with BBs and we had to tape cardboard over the drywall because everytime we missed and hit the wall instead, the BB would leave a nasty little dent. We had a dartboard target with an adhesive covering on the front that would stick to the BB and keep it in place after each shot. This way you can tell where your shots land and we became increasingly better at sniping the bulls-eye with my pistol. We were having a lot of fun with my gun. Little did I know that buying the pistol would be the most +ev decision I had ever made in my business life.
November rolled around and edzwoo was talking about how it'd be pretty cool if we sold Airsoft guns on eBay. We threw around a few ideas but I wasn't very interested at the time. Shortly after Thanksgiving, edzwoo and I were walking on the quad when talk about selling the Arisoft guns came up again. Again, edzwoo talked about how we should try and enter the Airsoft market. We had done some research by this time so our discussion was a little more organized than back when we were just tossing ideas around. I definitely thought Airsoft was a good product to sell, but I had a lot of concerns about partnering with edzwoo. However, we've been friends for close to seven years by then and if I was going to go into business with anyone it would probably be him.
I didn't intend to stop writing here but I'm really tired and need to get some sleep. I'll try and finish this up next week.
So I haven't made a blog post in quite some time now and just figured I write a little something here on LP. It's been so long I feel like I have to reintroduce myself.
So whenever I visit LP, I spend most of my time lurking in the ROFL thread. If you haven't checked the thread out before, you should take a look. it's usually on the first page of the General section here on LP. I've made a pretty decent amount of contributions to it and have been referred to as the ROFL Thread guy from members here on LP.
I'm roommates with acckerman and edzwoo. I'm president of the poker club at University of Illinois at UC although I do mostly the administrative work, edzwoo is the one who deals with most of the poker related issues.
I started playing FR on fulltilt about two years ago, made it up to nl100 before I quit six months ago.
I realize this might not be the best time to post something like this since Black Friday is still on everyone's mind but the majority of this post will be related to the business I run with edzwoo. If you guys have any questions regarding e-commerce or online retail in general, I can try my best to answer whatever you want to know.
--------------------------
edzwoo and I have been doing e-commerce since freshman year of college. We started off selling SD cards and flash drives on eBay. By sophomore year edzwoo was playing poker pretty frequently and was talking about playing poker professionally. I played poker from time to time but was a lot more focused on eBay.
After the SD cards and flash drives, I began selling Kohl's coupons (a clothing department store). When you sign up for the Kohl's newsletter, Kohl's emails you a $5 off $5 coupon 7-10 days after you sign up (you can read more about it here). I first found out about this promotion after stumbling across some sellers who sold these coupons on eBay. I naturally wanted to sell these coupons myself as well. So after an hour or two of research, I set up a very basic system where I would sign up for the newsletter, harvest the coupons a week later, and then sell them in batches of five for $4 per batch. It took approximately 10 minutes from start to finish to obtain the five coupons and email them out. Soon after, I knew there was some serious money involved with this with very little work and almost zero investment involved.
As time passed, I started buying gmail accounts off blackhatworld 100k at a time. I then hired a programmer from Spain who created programs for me that would automatically sign up for the coupons using the gmail accounts I purchased, harvest the coupons and format them, then send them out to eBay buyers through a business gmail account. I eventually became the largest Kohl's coupon seller on eBay, at my peak I was making $300 a day. This did not go unnoticed though, a large number of new sellers entered the market driving prices down a considerable amount. My biggest competitor was a woman named Michelle. She never replied to any of my correspondences and the only time I ever had any form of communication with her was when Kohl's stopped sending out coupons for three weeks or so. I got an email from her asking if I was having the same problems she had, this is how I found out her name was Michelle.
Michelle eventually stopped selling the coupons, I didn't know why. But in her vacancy a bunch of new sellers arose who formed a sort of "coupon cartel". They wanted to limit the number of coupons supplied onto the eBay market in hopes of keeping prices high. Some of the members in this group were from the old days who were selling coupons long before I even knew about its existence. They were talking about how a batch of five coupons sold for $10-$15 back when the promotion first began.
I never ended up joining the group mainly because for a cartel to function, they must control resources that were not readily available. Since Kohl's coupons could be obtained by anyone with an email account and an internet connection, it was extremely easy to enter the market. I also ran some regressions with the numbers the group members proposed and I didn't think there was any point in reducing the supply when I was by far the largest supplier.
Naturally, the other sellers were displeased with my decision. I got several emails that were less than pleasant to read, some were threats from the group stating that they would sell their coupons at a loss just to undercut me and force me into joining. One seller actually started purchasing coupons from me just to leave me negative feedback. I would block his accounts but he would just make new ones. Eventually, the negatives stopped coming. I never found out why.
Towards the end of my coupon run prices had dropped to $0.99 for a batch of 20 coupons. I was also contacted by Kohl's department of claims and loss twice to stop what I was doing, although neither time was done officially through Kohls.com itself, always through eBay. Gmail implemented a ton of new security features and I couldn't buy any more of them. The ones I did manage to buy were deleted by Google in a few days. I ended up using a catchall email address for a while but that just didn't work as well.
Eventually, eBay suspended my account, although not just for the Kohl's coupons. I had a lot of policy violations that were very vague and not even shown on the eBay website (eBay is actually a terrible place for sellers, if you ever go on the eBay forums it's just always full of people complaining about their policies). eBay said if I sent in my driver's license along with some other information there was a chance I could get my account reinstated. After I sent the required documents in, I became permanently suspended.
In addition to the Kohl's coupons, I was also selling Proactiv coupons, JCPenney coupons, Lowe's coupons and Bed, Bath & Beyond coupons. I always wanted to sell Staples coupons but I could never figure out how to get my hands on them. I was also selling a lot of random goods I purchased off Slickdeals at low costs and then would resell at a little below retail price. I was selling everything from Oakley sunglasses to designer purses to DVDs to PS3s. The money I got from that, in addition to the money I made from the Kohl's coupons was how I was able to fund the business venture I started with edzwoo in April 2010.
Wow, sorry guys, I didn't know this post would be so long, I was actually planning on talking about the business I'm running right now but I ended up writing a lot about the history of how I started off. To keep it short, I'll cut if off here and write more about the current business next time.
