The State of eCommerce in 2024 with Brendan Gillen

In this episode, Nathan interviews Brendan Gillen, an e-commerce expert and founder of Fight Gear Direct and the e-Commerce Academy. They discuss the performance of e-commerce in 2024 and the importance of innovation and adaptation in the industry. The conversation highlights the need for e-commerce operators to understand their numbers, focus on profitability, and find ways to increase average order value. The conversation covers topics such as branding, measuring success, customer acquisition and retention, and the use of AI in e-commerce. 

Engage and follow Brendan here: 

Youtube: https://www.youtube.com/@theecomacademy
Ecom Academy: https://ecomacademy.co/
Facebook: https://www.facebook.com/brendan.gillen
Instagram: https://www.instagram.com/brendangillen/
TikTok: https://www.tiktok.com/@theecomcoach

Takeaways

• E-commerce operators need to continually innovate and adapt to stay ahead in the industry.
• The performance of e-commerce in 2024 has been mixed, with some brands experiencing record growth and others struggling.
• Retailing can be challenging due to the lack of control over the supply chain and the need to differentiate from competitors.
• Understanding numbers and focusing on profitability is crucial for e-commerce success.
• Branding can provide pricing power and higher margins for e-commerce brands.
• Increasing average order value through add-ons and upsells can boost profitability. Branding is about positioning your brand in a certain market to attract a specific audience.
• Measuring success for each part of the business is crucial, and every role within the business should have a specific outcome that contributes to overall sales.
• Attribution in advertising is becoming more challenging due to privacy policies and changes in technology.
• Personalisation and the use of AI can enhance customer engagement and improve marketing strategies.
• Focus and consistency are key to achieving long-term success in e-commerce.

Chapters

00:00 Introduction and Background
01:19 Performance of E-commerce in 2024
05:31 Challenges and Benefits of Retailing
07:31 Understanding Numbers and Focusing on Profitability
10:46 The Power of Branding in Pricing
12:46 Increasing Average Order Value for Higher Profitability
25:20 Measuring Success for Each Part of the Business
28:48 The Challenge of Attribution in Advertising
30:59 The Value of Personalization and AI in Customer Engagement
36:58 The Significance of Focus and Consistency in E-commerce

Transcript

0:01

Welcome back to the blues brothers podcast. In this podcast, I'm joined with Brendan Gillen. I had two paragraphs written out to introduce him, but I don't think I'm going to do it justice. So I'm going to pass over to Brandon to talk about his background, introduce himself before we dive into a bit of chat around 2024 performance, as well as some innovative approaches to customer acquisition. So thanks for joining me, Brandon. Thanks, Nathan. It's really fun to be here. And usually someone introduces me. So this is the first time I've had to introduce myself and it feels a little bit braggy, but I'll just do it anyway, because at least then it gives people context. So I've been in e -commerce for around 15 years and I've worked in some of Australia's biggest brands from Pacific brands to Wesfarmers, two times U -Pet stock. And my role has always been head of e-commerce. Three years ago, I decided to put my money where my mouth is and launch my own e-commerce store. So I run a direct consumer retailer called Flight Gear Direct. At the same time, I also launched a training academy, which is called the e-commerce Academy. So I basically wanted to practice what I preach and then teach what I practice, if that makes sense to people. And it's been a lot of fun because working with other entrepreneurs and running my own stores helps level me up so that what I'm teaching, I'm learning and what I'm learning, I'm teaching. And it just seems to compound and help me get results. So yeah, that's sort of me in a nutshell and where I sit today. Yeah, awesome. I want to start this off by zooming out a little bit and asking a question that I've actually never asked before on this podcast, which is how are you finding 2024 so far? You've obviously got your finger on the pulse when it comes to your own brand, which is a retail store, but you also have the academy. So you're looking at a hundred plus different student stores and how they're performing, how they're going. How are you seeing performance so far? great question. If I look at my own businesses, we're seeing some record months and we've seen some really big growth over the last few months, using different strategies in the way we do media buying and the way we do SEO and conversion rates. We are seeing some really, really strong growth. That being said, from a operational perspective, it's been a real challenge from supply chain to, you know, funding to, you know, getting things done. So the actual operational side of the business has been really challenging, which can impact growth a little bit. Hopefully that sort of makes sense. From a looking at sort of the hundred plus stores that we look at all the time, it's been a mixed bag. we see some stores are going really, really well, and where some stores are really struggling. But what we're finding is the stores that are doing well are the ones that are continuing to iterate. So people that are using strategies from last year, which doesn't sound like that long ago, are finding it a lot harder to get cut through this year. So in particular, if they're using certain meta ad strategies that are last year's strategies and trying them now, they're not necessarily working. Same with Google, same with email strategies and things like that. So really the brands that are working well are the ones that are continually innovating. Yeah, perfect. I'd say that we're probably saying the same thing as well, is that those brands that are doing the same thing that they've been doing over the past two years are getting crushed and are seeing 20, 30 % reductions in top line revenue. Whereas those that are continuing to stay on the edge and being a lot more strategical and thoughtful with where they're allocating their ad spend, as well as just their focus in general, are actually seeing year on year growth. We have 40 to 50 % of our client portfolio is up. considerably year on year and is doing better months than they were doing back in COVID. And so it's, I think this year, maybe next year, maybe even the year after, it's going to be a really good opportunity for strong Ecom operators, I feel like to flourish. where a lot of the weaker operators that may be caught in their ways or aren't on the forefront or aren't really deep in the technical details of what they're doing and where they're focusing on and continuing to stay on top of content, learn, evolve. They're the ones that are probably going to see a continued decline. With that bit. what we'll, what I see there, and I completely agree with you is that sometimes they're a bit too scared to change what they were doing because it used to work and they think that it's going to come back, but it's not. So it's like, you've got it, you got to move. You got to shift and pivot. Yeah. fact that during COVID, a lot of brands could almost do anything and they would print money. It was it was really a money printing machine at the time because everyone had so much free disposable income, everyone was turning to online demand online went through the roof and CPMs and costs didn't really follow at least there was a little bit of a lag there. And so there was a huge opportunity where anyone could almost launch a store. And if the product was positioned well, they sort of knew what they were doing. They could be profitable out of the gates. And even if they were sitting at, let's say five to 10 % net profit, it was a good little side business to be running during COVID, especially when you're working at home all day. And then you start to see CPMs raise, everything gets a bit tighter. You move into 2024 and that five to 10 % net margin squeezes down to zero very quickly with just some poor allocation of ad spend or some overinflated op ex you brought maybe a few too many people on or you went into a warehouse that was projecting way too much growth. And now you're in a really sticky situation where you're You're looking at the landscape and maybe now you're doing the upscaling. Now you're saying, okay, how do I run a strong EDM and retention strategy? How do I innovate on acquisition? Do I need to be testing more creative? And you start to look at all of these different lanes. I feel like that's the period that we're in at the moment. Yeah, completely agree. And I think what tended to happen then was there was also expenses creep. So people were thinking like it was always going to be like this. And often, you know, new operators to the space, they start stacking their expenses and realizing, okay, the glory days aren't always going to be there. And then their expenses creep up and they can't get rid of them quick enough. And, you know, really, their profitability just completely declines. Yeah, this is exactly what someone said to me the other day. Someone from another agency actually said this to me, which was that we as an agency consult now across the entire P &L. And I was talking to him about how OPEX is super overinflated for a lot of these brands who had really, really strong COVID numbers. And then they saw this decline and he said, well, that's easy for you guys. Cause you just tell them reduce their OPEX. And I said, I wish it was that easy, but OPEX for econ brands is generally warehousing costs and people. Two things that you cannot get rid of easily. Most people do not want to reduce their team. It's very difficult conversations and normally they're never reliant on the team or warehousing has enormous lease terms, which you can't just zap straight away. So I said, yeah, it's great to look at it and consult on it, but there's not really much you can do once they start to layer that OPEX onto their P &L. I think it was interesting because when e-commerce first started, and this was like a long time ago, it's like a low overhead business. We just sell online. We don't need retail presence. We don't need any of this sort of thing, but it's actually really couldn't be further from the truth. You need larger footprint of facilities. You need more staff. You need all these things. So the idea of low overhead is completely gone. Yeah, for sure. In terms of KPI and performance at the moment, how do you approach KPI and both your own brand on a day to day as well as a monthly basis? What kind of reports are you pulling up? What's your North star? And then what are you advising on for all of the brands within your community? So in terms of a North Star for our business, we look at profit and contribution margin all the time. So we look at that as best as we can on a daily level, making sure that we are profitable every single day. So that's sort of our first metric. That's our metric to make sure we maintain a business. In regards to growth of a business, we look at cost per acquisition and customer lifetime value. They're the sort of two keys that we look at in both my businesses as well as the guys that we teach in the academy. And that's really important for us. we look at that across the entire media landscape, whether it's paid media, whether it's earned or whether it's SEO, and we look at it overall. So whatever sales we make for the day, we look at how much we've spent, and then we look at what it costs to get a new customer. That's sort of the first metric. So a bit like an MER metric from a daily level. Then what we look at is what the retention rate is of those customers in our lifetime value. So, you know, if we have customers that's coming back every three months, we now know, you know, what we can invest in to get a new customer. So that's sort of our... cost per acquisition. So in terms of three metrics, four metrics we look at is contribution margin, making sure we're making money, making sure that we're acquiring customers at the right rate, that they're spending enough with us over time, and that how much it costs us to get a new customer. They're sort of the metrics that we look at at a very daily level. Yep, so you're looking at contribution margin daily. Absolutely. And some of that is calculated contribution margin, not necessarily real contribution. So obviously we don't get a reconciliation every single day. Otherwise, my bookkeeper would lose their mind, but we can put, we put our expenses in there. We put our projected overheads. We put our projected, you know, expenses in there and we can sort of, and as well as our margins, and we can sort of understand what our contribution margin would be for that day. But obviously at the end of the month, once we do the roll up, we can see what our real contribution margin is. That's not too far off to be honest. Yeah, and when you're looking at lifetime value, what time period are you looking at for LTV? So in our store, it's around actually nine months. So every store is completely different because, you know, if you think you're, I've got clients, a coffee brand. And so their lifetime value is they look at when their next purchase is. So frequency of purchase. So the next purchase might be three to five weeks. Whereas our brand where we sell like boxing gloves and shorts and things like that, we're finding it can be anywhere between nine and 12 months. So we're looking at, okay, if we acquire a customer now. When is the next time they're going to shop with us and how much are they going to spend? So let's just say they spend $150 for us in the first purchase. Is their second purchase going to be $150? And when do we think that's going to be? Is it going to be nine months, it's going to be 12 months or what's the average? Because then we look at our lifetime value over that period of the second purchase, there might be a $300 customer over nine to 12 months. So then we can work out how much we invest in that new customer. Hopefully that, does that make sense? Yeah. total sense. Being that you run a retailer store, what are the challenges that you see with retailing in comparison to having your own product? The obvious is being the hit on gross margin. And maybe you have a play down the line where you're looking to introduce some high margin products that you manufacture yourself. What are the core challenges that you see there? And then how are you consulting on that to members of the group as well? Because I'm sure that's some of them would be trying to go down the retailing route and then others would be manufacturing their own products and they're sort of playing two different games. Yeah. So I learned this when I was at Wesfarmers, which is a, you know, they're a retailer of other people's goods as well as sort of their own goods as well. So we do have a combination of our own branded goods and their home brands that you might not even realize that they're our brands, but they just fit nicely within other big brands that we sell. So there's pros and cons of selling other people's brands means we don't need to necessarily do the awareness marketing so much on their brands because them as the brand owners do it for us. Obviously we take a margin hit on that, but we don't need to do the above the line marketing, which... might not have a greater return on ad spend. So that's sort of one pro and con. The other con really to selling other people's brand is not having control of the supply chain in depth. So we only get access to the stock that they create and we can't get them to make it quick enough for us as an example, which means we're limited to what we can sell based on what our supplier can give us. So that's sort of one element that holds us back. But in saying that, we don't need to do the heavy marketing and we just capture the demand for those products. We do mix it though with our own high margin products and we use them typically as like add -ons and different app sales and things like that. So... products that people might come in for the big brands. So someone might come in for an adidas pair of boxing gloves, a well -known brand, good quality. We would then pair it up with one of our high margin accessories that go with it. So think about when you go into JBI find you go to buy an iPad or something. They can't give you a discount on the iPad because the margins don't allow it, but they can upsell you a case or a carry case that is high margin. That's probably their own brand that they give to you. So that's sort of the strategy that we play out when we sell other people's products. In terms of where we teach our community, sometimes, actually, most people in our community sell their own products anyway. So there's only probably a small margin that sell other people's products. And so we would talk to them about what are some additional products that they can sell to get more value out of those. Yeah, there's probably... I'm going to take a stab in the dark here. I would say there's probably one to 2000 supplement or health brands startups that have tried to launch in Australia. They probably do about five to $12 ,000 a month in revenue. And they've probably been doing that for two years because they all launched during COVID and they're trying to take them off the ground. And they're doing a pure D to C play. I've advised a few of those brands to start retailing because I think it's a way to, As you said, easily get new customer acquisition by leveraging brands that already exist within the market. You can go straight onto Google shopping and take that traffic onto store. You can go straight to Facebook. And if you've ever run a Facebook campaign with, let's say a Nike product in it, you'll know CPC is a 20 cents, 30 cents, because every single person on Facebook knows Nike. So when they see the product, they're always going to click. There's no, there's no learning process there. And Facebook knows exactly who to serve that ad to based on prior clicks on ads. Nike terms within them. So the targeting is already dialed in there for you. The customers are already there for you. You just sort of have to go and capture them. Do you agree with that recommendation that I've given a few of those brands? Absolutely, because you don't need to do the consideration phase, you know, you don't need to do high type of funnel type strategies. I completely agree if you're running your own supplement brand, which might be Brendan's bulking supplements or something like that. No one knows who that brand is. But if I put it next to a Masashi, Masahi, I'm not sure my supplement brands are not in my space, but they are on it or whatever it is. They get the, you get the traffic from them, but you try and sell them into your brand or at least part like bundle it with your brand or something like that, because their brand instantly gives your retail site authority. And you do see this with large retailers as well. They'll often put the big brand name in the window to attract people in, but then they'll try and sell them the other product. Yeah. Yeah. I'm glad you agree with me on that because I've got a few businesses to completely pivot their model to more to more market based retailers rather than pushing that individual product. Because it's really, really hard to cut through, particularly in that niche where a lot of players in that space are playing the LTV repeat purchase game, which is actually what the last podcast that we put out was about, which is how you really should be first purchase profitable. Any brand. that's trying to play the game of repeat purchasing and being profitable on second or third purchase. I'm under the belief that you have to be an incredibly sophisticated e -com operator to be playing that game. There's a lot of opportunity in that game because you have to be incredibly sophisticated. And so if you can crack it, you can do well there. But being profitable on first purchase, particularly if you're self liquidating the whole business, so you don't have any funding from elsewhere. That's what you should be building the whole unit economics of the brand around. And if you're trying to sell a $40 supplement with a $20 margin there, because you haven't reached economies of scale, so you don't have great. cogs and cost of delivery there, it becomes a really, really difficult model to plan. I'm not sure about how many brands you see sitting at $10 CPAs or $15 CPAs, but it's generally pretty difficult, particularly in a really, really competitive niche like whole supplements. Yeah. Yeah. And I would say for those brands that do have those low margins and don't have the economies of scale is, you know, what, how can we increase the average order value and not just sell the one unit, right? How do we sell bulk purchases of it? How do we put the a hundred percent markup product add -on? So a great example of one of our products that we sell is we'll have a pair of boxing gloves that we sell, which is not great margin mix at someone else's product. Okay. but we will cross sell them with a pair of boxing wraps. And if you, I don't know if you're into boxing, but they're the things you wrap your hands in so that when you punch, you don't hurt your knuckles, right? Now our brand ones, we obviously get a great margin on them. Okay. Which means we can affect it. Let's just say they're $20. That means we would make an $18 margin right on that product as an example, which means we just make $18 gross profit instantly, right? On top of the product that I had, which then makes this transaction not just a 40 % margin product in terms of the overall transaction, we start getting into 50s and 60 % margins just by having this small add -on on the side. So sometimes we go all in and we say, I'm gonna recreate this brand new product, but sometimes it's actually the little add-ons that get you more margin for slower value. We call it the would you like fries with that method. So the idea is, you know, fries have a great margin on it when you go buy a burger, but they charge you five or $6 for a thing of fries, but it would cost them 20 cents to make them. That's where their margin is. They might not make margin on the burger, but they make it on the fries. Yeah, yeah, I was talking about this in another piece of content where I used to sell patio heaters in the US during COVID. And I was selling patio heaters at 1 .2 thousand per unit. But the margin on the patio heater was less than the patio heater cover that got upsell in the post purchase flow. And so there was more contribution margin on the hundred and twenty dollar cover. than there was on the $1 ,200 patio heater because of all the shipping costs associated with shipping a product that big. Yeah. It's a hack that not many people are doing. Right. So it's such a simple, simple add on that you can do. Yeah, I think it really comes down to just knowing your numbers and really understanding contribution profit at a product level, which is something that most Ecom operators don't want to do because they're more product orientated people. They come into e -commerce with a product, an idea that they want to push. And the second you start to drill in financial accounting, it's, I don't want this. Yeah, it's funny you say that. So in our eCommerce Academy, the very first thing that we get people to do is what we call our eCommerce economics. And we start building out a scorecard on how... how economically viable your product is so that we can understand how to run ads and, you know, how to do all the other things that you need to do. And that's an eye -opener for a lot of people because they go, really? I can't operate on a 40 % gross margin. Not easily. No, you can't. Right. So then we go, well, how do we fix that? You know, do we have to increase your price? Do we need to get better buying, better buying abilities? Do we, what is it that we can do to increase that gross margin so that... We don't have to be scrimping and saving underneath and can't afford ads and can't do all sorts of things. Because if you don't know that you can't actually do anything else. You can't, you can't buy ads. You can't, you know, invest in, in stock. You don't have good cashflow. You don't have anything if you don't know your numbers correctly. So I'm really glad that that's exactly what, you know, you're talking to your clients about. Yeah, how do you approach pricing? Because I see across the board that most people don't price correctly at all. They just keystone price, which is they take their cost of goods that's on their moq order from a supplier and they go, let's times that by two. And then that's the price on the website. And then there's no associated variable costs layered in. There's no really even looking at competitors and saying what, price elasticity there is because a lot of the time you can mark up a lot more than you think. And it gives you a lot more room to go and acquire a new customer. Yeah, I'm not a pricing specialist, but I do know that you shouldn't work bottom up, you got to work top down. And what I mean by that is, is yes, you have to look at your competitor set, right? So look at whatever product you're selling in market, and what are you competitive selling it for? That's that's sort of your baseline that you need to work on. And then you say to yourself, okay, if I need to charge more than them, what additional value am I bringing? And how can I actually charge more than them? So look at how much you should be able to sell this product for. So let's just say, Your competitor sells for $100 and you sell it, you want to sell yours for 110, but it's exactly the same product. You then need to be able to say, well, how can I prove that mine's $10 worth more in value? Okay. So that's something we need to work at is what's the differentiator. If we can't do that, then we need to look at how our margin plays into it. And do we have enough margin in it? Do we need to decrease our cost of goods? What is it that we need to do there? Or how else are we going to get a second purchase or a third purchase from them? But. From a pricing perspective, competitor set is super, super important because if someone sees a new brand come into market, the first thing they're gonna do is say, well, I'm gonna buy it from this other person. And if price is your only differentiator, they're gonna choose the incumbent that they know more about. Okay, then you have to do a harder job of selling them. So if it is the same price, then we've got to look at how do we value add. And really, when I think about value, you know, we can charge twice the amount of the competitor. We just need to show that the value is worth that amount. So if it is... better quality, last longer, lighter, heavier, stronger. What is it that we can prove? Uses the different technology. We just need to be able to prove that it is. And if you think about, I'll use Apple as another example again, look at an Apple iPad versus a Google tablet, like an Android tablet. Android tablet is probably far superior in terms of the technology, but you know, Apple is far superior in terms of the ecosystem. Okay. So people will buy in because they want to be part of the Apple ecosystem, not necessarily because of the technology. So that's how they can fetch a far greater price. So you just got to think about the value exchange of what is your product? What is the problem you're solving or what is the thing you're going to give to the person and how much are they willing to pay for that irrespective of, you know, what your cost price is. The cost price comes into play if your margin isn't great enough. So I'll often see exactly what you said. I'll just charge twice the amount I paid for it. Right. But then what happens when your costs go up? Right. Do you then increase your price, but your competitors cost didn't go up? What happens when your OPEX goes up? So we need to work at the top, the price we want to sell it for. and then work our way down and make sure we have the right costs in place. Yeah, I think that I think that's a great framework to to walk yourself through. And I have to admit, I have over the last few years, I've had huge naivety when it comes to branding. Because as a direct performance marketer, and my background being and starting online stores, and just being in the numbers and being very accounting driven. I always thought branding, like what why do branding agencies exist? Why do people do branding? What What is this all about? It looks very up in the air, you can't measure it. What does it do? But Ultimately, like what I've realized over the past six to 12 months is that branding enables you to have stronger pricing power, which doubles your margins. Because eventually if you can squeeze your prices up by 25 to 30%, that drops straight to bottom line because there's no incremental cost there by building branding into your image of the products that you're selling. So. Yeah, I have to admit that I've always hated branding and I've always pushed back on it anytime a client said we should invest in it, but I've changed my stance there strongly. Yeah, look, I think you would make kindred spirits and that because I'm a performance marketer at heart as well. I've always loved the numbers. And that's why I love e commerce is because you pull this one lever, put money in there and money comes out the other end, right. And brand is one of those ones that has always been this holy grail of like, we need it, but it but I can't measure it. So I just never I was the same as I was ignored. And one of my old GM said to me, he goes, you know, branding doesn't pay the wages. And I'm like, well, okay, maybe it does. Maybe it doesn't. But this is when I worked for big brands. So clearly, branding, something to do with it. But I'm probably the same as you, over the last six months, branding has played a part. The challenge is... is how do you quantify the investment in branding, right? There's definitely an element there, but it has to be done well and it has to be done with intention. So that if you're branding, it's to be able to position you in a certain market to attract a certain audience. I think if you just go, I've got a great logo and great color palette and a great style guide, that's not branding. Branding is being able to identify your brand and the audience that it exists in and the avatar you're trying to acquire. Because then you can put the price in place. You can be a cheap price fighter brand or you can be a luxury brand and the way you develop your brand, you have to have that intention in mind so that you know that your messaging, your pricing, your product, your quality, your copywriting all has to align with the avatar and the brand that you're trying to encapsulate. Yeah, I saw Alex or Mosi say that branding is making associations and that the only way to truly measure brand is to measure pricing power over a five year time horizon. And so you cannot measure it for five years and then it's determined on how much could you increase your prices over that five year period on new product launches. So yeah, I thought that was a good frame to look through. I had, I have a... I don't know, I call it a philosophy, which is that the growth limiter on every small to medium sized business is usually the founder's technical ability. And whether that's the technical ability to hire the right people, whether that's the technical ability to know how to allocate capital efficiently throughout the business. What do you think the core skill set is that limits most small to medium sized data CD Econ brands? I think it's the way that they measure success for each part of the business. And what I mean by that is, is everyone, there's different roles within the business. And sometimes we just go, well, we just need to get more sales. Okay. But every role within the business has a specific outcome that leads towards those sales. So if I think about someone who's in the warehouse, right, their KPI or their role should be, how do I get orders out the door faster? So we get good customer satisfaction. So I get good customer satisfaction. I get repeat purchases. If we get repeat purchases, we get an increase in sales, right? So then we think about the digital marketer. The digital marketer is the person that has to get sales in the door for a low return on ad spend. So as a manager, we need to look at what, you know, the ROI or the cost per acquisition is going to be for that. that role, so they have a specific objective. And then customer service might be satisfaction score and, you know, reduce return rates and, you know, conversion rates or something like that. So I think the biggest thing holding back small e -commerce store owners is not understanding the outcomes of each individual role in the business and measuring each of those roles individually so that we can tweak them. Now, That can be a two or three person team, we can still do that. Everyone's overarching objective is sales, but how does their specific role relate to the outcome of sales in their business? And that's what I find is the biggest challenge that people have because we're all a bit generalist in our roles when we run small teams, but we need to go, okay, who's the owner of retention? Who's the owner of dispatch? Who's the owner of returns? And giving those sort of outcomes to a key person in the business. or at least measuring those outcomes if you're a solo, solopreneur to make sure that, okay, I do this thing, this thing happens. Did it happen the way I wanted it to? If it didn't, how do we fix it? So being really specific in what your outcomes of your activity are. I think that was a really, really good answer. I don't think I could have prepped that even if I tried. Look, it's interesting that you bring that up. So this was again, I think the value of where I've been in e -commerce is I worked for massive companies that had this, this was tied all the way in because you had performance bonuses, you had, you know, budgets, you had to, he had all these things was really analytical. So the way I've thought about is how do you simplify this to be in a small business to get the power of a big business and, you know, simplifying outcomes based on activities is basically what we need to do. Yeah, yeah, it makes a lot of sense. I on the paid media side there, then there would be an open discussion around attribution, right, which is. How focused should a business owner be on trying to figure out his Facebook driving conversions? Is it Google? Is it Clavio? Because I know Clavio is claiming about 50% of it. Where should I be looking? Because I think it's a really valid question for small to medium businesses to be asking. Because at the end of the day, you can really simplify business down to allocate capital as efficiently as possible. And so if you know where to put free cash flow, you should be able to theoretically grow the business faster. Attribution is one of those words that we could, you and I could chat for hours and we never come to an outcome with what it is, right? And I'm sure you know that, like when you said that, I'm like, okay, this podcast is going to go for ages now, as soon as you mentioned attribution. To be honest, our visibility on real attribution is continuing to decrease everywhere, right? With privacy policies getting introduced, you know, cookie lists, browsers being released, you know, iOS and all the stuff that's getting in there. So attribution is harder and harder to prove. So it's not a matter of where we allocate our spend, it's just that it's harder and harder to prove. Yes, we have Triple Whales and Northbeams and all these other tools that supposedly measure it. The way I look at it is we basically look at an overall KPI now, which is cost per acquisition, customer lifetime value is sort of a metric in our CAC, fill life to LTV. So that's our basic attribution. And what we basically do is if we reduce spending one channel and that comes down or goes up, then we need to increase spend in that channel. We don't necessarily go deep in anymore into each of the channels like we used to. We used to do that like, okay. Google ads is bringing in this, Facebook ads is bringing in this, Klaviyo is bringing in this, okay, do more Facebook ads, do more Google ads. But we found that they work so closely together that we just need to look at the overall cost per acquisition and just make sure that meets within our standards. And if it does, we just keep spending money on all channels. And we just keep growing and growing and growing. And then within the channel, we might look at those metrics at a platform level, but we can't really trust those. It was interesting. I've seen a study that someone did recently is they turned off their Google ads, right? Because they said, it's not working. But what happened was their Facebook ads then started underperforming when their Google ads went off. Right. And, but when they looked at all the attribution metrics, none of that made sense. They turned the Google ads back on Facebook ads improved again. So we don't know what the correlation was there, but when we look at the stats, that was a clear correlation, but we don't know what the causation was of that. But they noticed that when Google ads went off, Facebook ads died and then vice versa. So in order to answer your question, we just measure attribution at one or two metrics, which is the cost per purchase or cost per acquisition, as well as our lifetime value, either increasing or maintaining is sort of the way we look at it. Yeah, I agree absolutely with what you said. That's exactly how we measure attribution internally as well. And we normally look at LTV to CAC. I think it's one of the best examples of are you profitable? Yes or no. And then off that, what should your OPEX be based on your LTV to CAC ratios? You can pretty easily pull into a full PNL. The... One thing that I really don't hear, let's say Australian e -comm agencies, or many people talking about, is incrementality testing across platforms. I don't really see anyone doing it. I haven't seen any resources on it. We have a few resources internally that we use where we'll do incrementality testing on a platform level. to determine is increasing Facebook spend driving incremental profit to the business. And you can do this. Anyone could build this right now. It's very simple. Just pull out order export on Shopify of daily orders, daily new customer revenue, daily returning customer revenue, because there might be correlations between those. And then put that into daily spends across both platforms and then measure correlation, do T -tests, do statistical analyses based on the relevancy and revenue uptake in proportion to spend uptake. And you can get validation on whether a platform is going to drive incremental revenue or not. Because I see a lot of brands that go and drive Facebook spend up because Facebook looks good. But as you said, a lot of Facebook is just retargeting Google traffic. Google traffic is so high quality and Facebook knows that and it can see the reference domain that it will just go and heavily prioritize Google traffic because the algorithms looking at individual users and going, okay, people that come from Google convert. 10X better than anyone that comes from any other data source. Let's just retarget those users, even in cold targeting, we'll just pick them up anyway. And so you end up with this overinflation and attribution on Facebook and business owners that are trying to get into the ad account will go, okay, let's just increase that. And they see no incremental uptick on top line revenue, particularly as well, because they might be baselining their performance against an average metric. So they're going, we wanna average a former. But right now they're sitting at a six or a seven, they go and start scaling spend, MER starts trailing down to a five, but they don't realize that the incremental spending increase for the revenue generated is not profitable. You spent an extra thousand, you only generated an extra thousand. That's a one MER. You shouldn't have done that trade. But because they're looking at averages, they end up just driving losses to the bottom of the P &L. Yeah, I can't say I've done it. You're right. I'm not seeing many Australian brands doing incrementality. I love that. That that makes so much sense, doesn't it? Like, it is sort of this and this is where in platform reporting can really throw you off because, you know, you continue to spend up on the platforms you think are working, but it's just scooping it from the bottom. Yeah, I completely agree with that. We've been looking at a lot around measuring sort of frequency of ads to try and work out which part of the funnel they're at, because if they're seeing them more regularly, then they're obviously bottom of the funnel. If they're seeing them less regularly, then we're top of the funnel and making sure that we've got that sort of good mix in there to making sure that we're getting enough revenue from the top and not just getting it all from the bottom of the funnel. So yeah, plays out to that little metric you talked about, which I'm going to take that one from you and... myself, so thank you for that. I've a interesting observation. Frequency in almost every single ad account is up enormously. It's almost the thing that I'm talking about in every audit now, which is that any big brand that I audit spending over a thousand, sorry, $100 ,000 a month in AU and ZGOS, frequency is at like a seven over a 14 day period. And I'm looking at the account, I'm saying this is all retargeting. You're just targeting the same people. And the issue with a lot of Australian and New Zealand brands, which I don't think many people know, is that you tap out the total addressable market pretty quick if you're spending $100 ,000 a month on Facebook. And all you have to do is spend about, I think it's about 700, 800 ,000 in historical spend, and you'll target 11 .1 million people. And that's half of Australia and Facebook won't want to target any more than that. They'll, they'll deem the other half of Australia is completely irrelevant and that won't want to target it. And so then you just go and start targeting the same people over and over and over again. And so I think that's, we're sort of going off topic here, but I thought I'd mentioned that anyway, which is that be aware of it. got a small market only 25 million, 26 million people, but it also proves, I guess, the It proves that the ad inventory is getting sent out a lot more. And I noticed this on Instagram a lot lately is every second story now is a, is a, is a sponsored ad, right? It feels like it used to be every fifth story used to be like a sponsored ad, but I now I'm seeing it like every second and third. So we're seeing that the inventory is definitely getting pushed out a lot harder, which makes sense of why the frequency is up, right? And what that means is we're seeing that people's creative is fatiguing as quick as it would on say a TikTok. We're seeing it fatigue just as quick now on meta as it used to and the demand for unique creative is getting higher for sure. Yeah. Switching gears a little bit. Have you seen any innovative approaches to customer acquisition or retention this year? Look, I don't think innovative in terms of changing strategies. so I might, I'll get a cut that bit out for a second. I don't think innovative in terms of like crazy technology, we'll talk about AI in a minute, but in terms of the way strategies are working, I think there's a mindset shift in the way we think about using AI and your media strategy and even your planning strategy. And we're seeing that the AI that's being baked into sort of all the media tools is getting really good. So if we think about. Google Performance Max and MetaAdvantage Plus, you know, by utilizing those instead of the old sort of bidding platforms, we're seeing a lot better results and letting the machine and the AI do its job for us, as long as we feed it the human element, which is the creative and understanding what's buying and looking at the metrics on what's working, but then just feeding it more of the things that it wants, right? So in terms of innovative, it's just basically leveraging the tools at our disposal and not fighting against them. And the brands that do leverage those tools while they're getting the best results by far. In terms of innovative, you know, this wouldn't be a podcast in 2024 if we didn't talk about chat GPT and open AI, but we're definitely seeing that people leveraging that for planning and being a marketing assistant and thinking about strategies and rolling out, you know, better content and better email strategies has been that they're getting to market faster and they're being more relevant and more personal. One of the members in my community, they have tied in ChatGPT as well as understanding customer profiles to personalize emails to people. That's been really powerful. So they're using OpenAI, they're using Airtable, and they're using Klaviyo to capture people's information, sort it in an Airtable, rewrite it with ChatGPT, and then feed it back into Klaviyo to create personalizations. We're starting to see that... AI is helping with personalization as well. So there's a few things there that I've talked about, but really the guts of it is leveraging AI and making sure that that's our innovative future, as opposed to sticking, you know, with our own old school methodology and trying to do it our way, you know, you've got to lean on the tools of their fair disposal. Yeah, that was a really cool idea at the end there. Particularly if you're collecting zero party data on the pop -up form and you're tagging it at the user level, you can customize all the emails dependent on the individual user attributes. Yeah, and we're finding that because there is a bit of this same, same and creative is the only way to cut through personalization is the other way to keep people right. So if we can be personalized, and it's not just knowing when their birthday is, it's actually knowing everything about them and then tailoring something to their personal experience. And this this company's product is very personalized. So having knowing everything about the person and speaking to them in their language. So you're relevant, you understand them a little bit like Alex Hamozi says, you know, you found your audience, then. You're going to get much better results, much better retention, much better profitability, cackle, that sort of stuff. It's going to be, it's just a way to do a personalization and use AI to help you with that. Yeah. When brands are trying to look for new tools and they're constantly trying to be on the forefront, there's one thing that me and Sebastian, co -founder of BlueSense Digital, always try to keep ourselves to, which is impulse control, which is that I have always got ideas running through my head. I'm going, let's launch four Econ brands next week. Let's launch a community group. I want to make a course. I want to do this. I want to do that. But at the end of the day, it's let's do the... fundamentals that are going to make the business grow and let's just focus on the one thing. And I find that personally really, really difficult because my mind's always in a hundred different directions, but we've managed to be quite good at that over time. We always hold ourselves to impulse control. with that being said, I still think that there's this almost this dance between you need to be on the forefront. You need to be learning. You need to be knowing what's working at the moment. But you also need to be sticking to basic business fundamentals and not going astray and always trying to chase a golden egg. So how do you approach that, particularly within your community group, where I'm sure there's people coming to you every day going, hey, have you tried this AI tool? Or hey, have you implemented this? I heard that this is going to give me a 50 ROAS. What's your general advice for the average small to medium business owner? Yeah, my mentor tells me that focus is a superpower, right? And as an entrepreneur, we don't have that skill set. It's one of those things that you don't have it. We just don't, right? Focus is really hard for us. And because opportunities are endless and we see that in e -commerce that, you know, we can do anything we want, right? We can go sell a supplement brand tomorrow. We can start a boxing company. We can do all the things, start a community, do all the things that we do. And if I think back to what I said was holding back, small e -commerce brands and that is being objective and outcome focused. That's how I tend to litmus test any new tool that comes in. Okay, so if I've set a goal for my companies, then I'll say, okay, these are my KPIs. If this new tool falls in front of me, how is this tool gonna help me hit that KPI quicker? And is it going to take me off path or is it going to keep me on path? And that's sort of how I, how I look at it. I'll never say no to looking at a tool, but then I'll assess it to be like, okay, is this going to help me get where I need to get to? Because sometimes there is a tool that comes along and it goes, Hey, that's really cool. Maybe we'll leverage it. Chat GPT was an example of that, right? If we didn't look at that, then, you know, I probably need to have four or five extra staff in my team. I don't need that anymore. But if I didn't look at it, then I wouldn't know that. So I guess the way I think about it is. Think of what you're trying to achieve and is this tool going to help you get there quicker or cheaper or more efficient or better? And if it is, then go in on it. That's from a tools perspective. But in terms of like opportunities and things like that, you know, we just want to try and swing ourselves back to what our original goal was and just keep working towards it because consistency at the end of the day compounds. So we keep doing the same thing for long enough. We're going to be successful, but if we keep jumping and changing. So let's just say you're a marathon runner, you're running a marathon, you get 20 meters, 20 kilometers down the road and you're saying, well now I'm going to be a a trail runner and you're going to run up the trails and then I know I'm going to now do triathlons and you never really get good at anything. If you stick to the one thing, but just along the way, try and enhance that one thing with better tools and you're going to get a better. Yeah, I couldn't agree more. Last question for you, which is, if you were gonna give one piece of advice, if there was one thing that a small, medium-sized e -com business owner can take away from this podcast and go and apply today, what would it be? Just remember that success is guaranteed. The time that it takes is not though. Okay. So if we think about all the successful brands in the world, and I've just finished reading a shoe dog by Phil Knight, who's the founder of Nike. I don't know if you've read it, right? Amazing story because Nike is a multi-billion dollar company. It took him 13 years to even make a profit, right? So sometimes we look at these big brands and we go, geez, these guys are so successful. I wish I was like them, but we expect it to happen in the first one or two years. It takes them multiple, multiple years to get to that success. So if I think about the... easiest, the smallest brands when they're just starting out is that it isn't going to be an overnight thing. And the people that do get overnight successes are a small percentage. Not saying it's impossible, but it takes a lot longer. But we just want to do the fundamentals well, be consistent, do the reps and just get better and better. It's like going to the gym. If you want to get lose weight, get fit, get strong, it's not going to happen overnight. You just got to put in the work. So really that's what I think about brands is. consistency compounds, like I said before, and success is guaranteed if you just keep doing the same thing for long enough, you're just going to get better at it. It just works that way. But if you keep chopping and changing, you're not going to get better at it. So really, it's just about being persistent, being focused, and, you know, just being laser focused on the end goal. All those three things are the hardest thing for any entrepreneur to do, I must say. But if you can get it right, then you're going to be, you are going to be successful easily. Yeah, I think that's a great piece of advice. It's pretty much focus on doing better rather than focusing on growth. Yeah. Where can people find you? So I have a YouTube channel now, so probably YouTube is the best place. So if you look up the e -commerce Academy on YouTube is probably the place that I'm at the most Instagram Facebook LinkedIn and all the places but yeah, just search me on there YouTube's probably where I have the most fun right now putting up videos every week and you know teaching things about a comm the insides of my stores any new stores I'm starting things like that. So I highly recommend you are I think it's I think I have to say like and subscribe now as part of my everyday conversation so you gotta like and subscribe to my channel and then I'll feel like a real YouTuber then. If you're watching on YouTube right now, make sure to link Brennan's YouTube in the description below and also like and subscribe to this channel. Thanks for coming on Brennan. Thank you.