How to Build an Online Product Empire Selling on Amazon
Brad DeGraw is a self-proclaimed Amazon nerd and eCommerce entrepreneur. He started with $100 and turned it into over 1 million in Amazon sales.
Brad has an obsession with Amazon and it led him to develop a system for creating best-selling products and proprietary Amazon launch formula. He manages a multi-six-figure Amazon business, and he's helped countless others go from Amazon clueless to Amazon super seller.
Can you just tell us about your entrepreneurial journey and what led you to start selling on Amazon?
I started a few years back, about five years now, where I had a regular job and I was doing paycheck to paycheck like a lot of folks. I was in an unsatisfying position and, fortunately, I got fired.
I didn't know it at the time. It felt terrible to come home with a box full of things and we had house guests so it was even more embarrassing than it needed to be.
I actually got started with Chris Green's book “Retail Arbitrage“. I started with a $100 and a Wi-Fi connection. I started just buying clearance merchandise and turning around and flipping it on Amazon. And that quickly evolved.
What type of selling do you primarily focus on today? Is it still the arbitrage model or have you expanded it to other to other forms of selling?
It's actually evolved. Arbitrage is a nice way to get started but that's not really our focus these days.
We actually deal with manufacturers and we make unique products and sell them online under our own brand. Some people call this Private Label. It's very similar. Private label is technically what they call OEM, which means it's off the shelf. They are already making these products. What you do is just put your label on it – so that's OEM.
We do a mix of OEM as well as ODM. And the “D” is for design. We make some design changes. In this way our product is unique. It's a better version of what's already on the market.
How do you figure out how to develop your own design? Are you taking something that's already selling well and making just a few tweaks or enhancements like changing the color or the shape? Or do you do something much more original where you have your prototype design and you start with something completely brand new?
So how do we make a better mousetrap? We look on Amazon. There are 1/2/3 star reviews and these highlight customers' missed expectations. So if you're going to buy a water bottle and for some reason maybe it leaked, or it wasn't comfortable, it was too small or the water got too hot or too cold too quickly. This is where you'd find the customers' missed expectations.
Based on those missed expectations we can have a designer actually make a change. Usually we focus on the simplest problem that we can fix.
When you're figuring that out, are you buying the items that sell well and then sending that item to your manufacturer to make a redesign?
I like working with designers here in the US. There are different kinds of designers: some people focus on textiles some people on hard plastics, some folks focus on electronics. So we look for the specialist that match. In every major city you have good designers.
We call them up and say: “Hey, I'm looking to build a better mousetrap. If you have access to the Internet here's what it's called. It's on Amazon and we want to add this feature. Do you think you can help us with that design change?” And they will either say “Heck, yes”, or they will say “Heck, no”. They will know right away whether it's a match or not.
And if so, 9 times out of 10, we'll send them 2 units: one they can take apart and the other they can stay together. Because sometimes when you take things apart it doesn't go back together.
You mentioned the US. Many teachers that talk about private labeling or manufacturing talk about going overseas. That's not something that you personally do in your own business?
We do both. We manufacture here in the US as well as overseas. There's really no one-size-fits-all. Someone says “always go to China”. Well that may not always be the best answer.
I live in Denver, Colorado and some of our products are actually manufactured here in Denver. And so sometimes it's the easiest and best way. It really just depends on what it is, how heavy it is and what the capabilities are local versus international.
One of the biggest advantages to going overseas is that the labor costs are so much less. But, of course, shipping would be so much greater. Have you found it to be more expensive to manufacture here in the US? What are the negatives to doing something domestically versus overseas?
When people are first starting out, one of the big questions is: How do I find great suppliers? And you kind of have to figure out where are they. Are they in the US, or overseas?
So domestically, there are a couple of advantages.
One, assuming English is your first language, chances are the person you're working with here in the US, English is also their first language. And they are working during normal business hours. It's so much easier to pick up the phone and call them, because they are almost certainly going to pick up. And depending on how local they are, you can actually swing by or they can come to where you are. Those are the advantages starting local. And you can get lower production quantities.
Now there are some cost advantages to going overseas.
You will lose sleep because of the time difference and trying to communicate with the Chinese, so be prepared for that. Also English is their second-language in 9 times out of 10, so there may be some communication difficulties.
If there is a way to save a tenth of a penny, chances are they're going to do it. So there may be some sacrifices in quality where you're not clear. In the United States, we are going to assume we want the best customers experience. With the Chinese, many times they are going to assume you want to save the micro-pennies, and that's not really what we are after.
Sometimes you have a different communication style.
Shipping can take a little bit longer. If it's by air, it's really comparable to the United States, I think. And you do have to watch when you're crossing borders. Sometimes there are restrictions on what you can take, and sometimes there are extra fees that you didn't realize of customs or duties.
So all of that goes away when you stick to just a US-based manufacturer, is that correct?
Exactly, yes. And one last thing on American-made. People will pay a premium for American-made. You can put a big old eagle on there and an American flag and say proudly “Made in the US”. It's entirely made in US and it's worth a little bit of a premium, depending on your market.
What types of categories are better suited for US manufacturers?
Sometimes clothing in the United States. But most of the time clothing is better overseas because there's more labor to it.
Kind of a sweet spot for the US is something that takes very little labor. Something like plastic parts. We need to do a small production run, maybe a 100 pieces or a few hundred pieces. You can actually have that done here whether it's 3D printing or the small silicone molds. You can have plastic silicone rubber parts made here at a comparable price to China for low production.
Now you've mentioned a 100 pieces at a minimum. That tends to be the hold up for so many sellers in moving into private labeling because it can be a big up-front cost requirement. Do you find that that minimum requirement or quantity requirement is still pretty high, or is that negotiable?
Everything is negotiable. Sometimes the designer actually has manufacturing capabilities here in the United States. So I ask them if they are a design manufacturer so that they can do both. And then I ask them, “Where's our breakeven point? Where's our sweet spot?”
If my prices are 10 times more and I only get half, versus ordering a little more, I want to do the thing that makes the most economical sense. It depends on how they have to buy the materials and how that breaks down. One hundred pieces is realistic for some products. Sometimes it's more. Sometimes it's less.
Do you sell exclusively on Amazon still, or have you expanded beyond Amazon?
Amazon is the best place for starting the product launch. We've started to look at options beyond Amazon. Most of our sales are still on Amazon to this day. But now we are starting to work on getting products into chain stores, so retailers like Walmart, Target, and Costco.
Where you in that process? Is that something that's still in the works or have you already begun to do that?
We have one product in 42 stores and then we're growing little by little. It's a slow dance but it's definitely worth it.
Take me behind the scenes of what a day in the life of Brad DeGraw looks like. What do you do on a day-to-day?
Sometimes we do live trainings. We have a lot of small groups that we're training in. Other times it's just working in our business, closing retail accounts or sending out proposals or samples.
We have a small team in the Philippines that does most of the day-to-day activities, so we don't actually log into our account all that often. We just get headlines and reports.
It is such an interesting story about how you and your wife met. Can you elaborate a little bit to share a little bit more of that story?
I actually hired my wife, not because she was my wife and it was convenient, but because I needed help in the business.
I put out a job posting “We're looking for someone who does customer service. We need outbound phone calls. If you think this is for you, send me a voicemail that says “My name is….and I'm your rock star.”
Emma, who is my wife now, at the time was the one who applied. She was just head and shoulders above everyone else. I did the interview and, even though she was 40% out of my budget, I went ahead and hired her on the spot. I could tell she had what I wanted in the business.
What sometimes happens is we hire people and put them in the wrong position. She became the business manager instead of just customer service. Sometimes synergy turns into chemistry, chemistry into passion. We did a long dance to get through immigration and now she's here in Denver.
You work together very closely with your virtual team. What does your virtual team do? What are some of the roles that you have them handle?
Amazon is nice and stable as long as your metrics are clean. So every day they go and look for customer messages – if a customer has a question that needs a quick response time. Sometimes Amazon will lose inventory. We have to go and track down inventory discrepancies and show supporting documents to get reimbursement.
Other times, it's just making sure the account metrics are healthy. If anyone has a complaint or if inventory was late or damaged, make sure that we have great customer service.
They'll reach out to retail buyers and start conversations there. “Hey, we have these products. Would you be interested in samples? We think it's a match for your market.” So they do most everything in the business that needs to be done.
Do you find most of the retail buyers you contact to be receptive to samples and in continuing the conversation beyond the initial outreach?
Yes, it's a bell curve though. Maybe 1-2 in 10 will say “Yes, send me samples”. And then a few will be at the exact opposite “No, please don't contact me again”. We take them off and our load gets lighter. It's nothing personal.
And then the rest of them – about half or a little more than half, is a follow-up practice where they didn't respond or we have to follow-up. They responded but it wasn't really affirmative or negative. We have to follow up with phone calls or additional emails until the time is right.
I also know you teach a lot about using systems in your business. What are the systems you use and have found to work well?
Everything for me is a system. Anytime something's not working the way we want, we break down the problem and find the root cause. And then rather than fixing the symptoms of where we're at today, we look at how do we eliminate this cause from ever happening again.
Google calendar is wonderful because it shows up on all your devices. It's highly interactive and easy to share. Asana for communicating tasks. That's a task management software.
We love tools like Jungle Scout, Merchant Words, and Scope. Before they were invented, we would be gathering all this same information by hand and putting things in spreadsheets. So, I love when we have great tools and systems. Anywhere we can systemize something, it's the absolute best.
I agree with you. I love systems and tools. Every time there's a new tool that gets sent to my inbox, I'm off on a rabbit trail trying to look into it because they make such a difference when you find the right one.
Well, especially for those folks who have been doing this for a little while, you want to move more into a CEO position rather than “I'm every position here”. We don't want to manage tasks and activities. We want to delegate the entire role to someone and we can teach them the systems and activities that work right now today.
But let your people know and empower them, and say “These things will change over the next six months. You will develop new systems and new processes and new activities that hit these same goals. I'm trusting you to do the research and empower yourself to evolve your position.”
You help sellers go from Amazon clueless to Amazon superseller. Now, can you please tell me how do you do that?
First off, mindset is a big thing. We find ourselves limited, generally speaking, by whoever raised to the age of five. Whatever their level of success and income is, I see a lot of people kind of get stuck right at that same level. And it happened to me, as well.
One of the first things we focus on is mindset. Can you make seven figures? Can you make eight figures? Where is your comfort zone? So we stretch peoples' mindset.
Everything that I've done in my business is a system. It's a process, it's proven and you can follow it. So we give everyone the exact same playbook.
Here's how you find the market. The market is a group of people who are passionate about a problem, fantasy or desire.
Next up, we will use “the parents of twins”. Not that that's a problem, but there's a unique set of challenges that happen you have multiple kids at the same time.
So we just go to Google and type in “must have products for twins” and you get tons of great things that come up. It's product ideas for people who have twins.
And then we'll take those things and we'll put them in Amazon. We'll run them through Jungle Scout and we'll find out, “Is there revenue here?”
We'll read the 1/2/3 star reviews and we'll look and see, “Is there an opportunity to meet these people's expectations better?”
Beyond that, can we make a small design change and get these products in the market and satisfy those unsatisfied customers? So we go through it and just make sure it's easier and doable for everybody.
When you mention finding a niche such as parents of twins, do you personally recommend that sellers target a specific market or to shoot large and just see what sticks?
“Dial it in” is our general motto. So, for example, when I first started I sold weight loss supplements. Now, that may or may not be the best thing for everyone but just follow me through the story. Weight loss supplements. We were selling like crazy thanks to Dr. Oz or, at least, the writers of the Dr. Oz show.
I would actually call up the best customers. I would ask them about their experiences, because we want to make better and better products. And what I found is that a third of the people never even opened the bottle and they would continue to order more. And this blew my mind because, logically speaking, I thought people took the product and consumed the product.
However, the buying experience is not logical, it's emotional. The reason why is because of a problem-fantasy-desire. They wanted to eat Golden Corral and 7-8 desserts. In a year from now, they weren't looking to have a bikini body. They were looking to have the same clothes fit in a year from now. That was the fantasy.
It blew my mind wide open that we shouldn't be in the product business. We should be in the ‘Problem – Fantasy – Desire' business.
You can do what we did. We started in supplements. Then the following year it was a 90-day fitness program. Then the following year it was portion control containers. The following year, it was something else. You can do that because it's the same Problem – Fantasy – Desire. It may be very different products and suppliers, but it's the same market.
If you were to start over again in your eCommerce business with nothing except the knowledge you've gained, what would you do?
I like kitchen products because there's no brand loyalty. We can do endless kitchen gadgets and build an empire just in that one space.
We all have people who inspire us to grow. Who are your heroes in business?
Well, there's some really great ones in this Amazon FBA.
Chris Green. It was his books that got me started and he's just so smart and insightful and able to break things down into their easiest components. So he's fantastic.
Barrington McIntosh. He's just a great person to know. Always fills you with energy and really simple and practical advice.
Do you have a favorite book, or a podcast you would recommend to us?
Here are 3 that I think are just fantastic:
Tim Ferris, his latest book is “Tools of the Titans” and he has a podcast. It's fantastic. If you haven't read it, pick it up. You don't have to read the whole thing. You can open to a random page and find great, great wisdom.
Another one for people who really love data is Harry Dent. He's an economist. His latest book is “Sale of the Lifetime” and he breaks down all these crazy, complicated economic concepts into one very simple concept.
Ryan Moran. He is someone I look up to in our space. His is “Freedom Fast Lane“.
Can you please tell our listeners the best way to connect with you and learn more about your business?
We have a newsletter that comes out every week. It's tips and tricks and strategies and just news about what's working in our life and our business. So you just subscribe at AmazonSherpa.com.
We've got some tools and training documents and some cool stuff.
You have always shared such amazing content. So I recommend everyone to definitely get subscribed and let Brad in your inbox. He gives such great tactical information that everyone can benefit from.
The one big takeaway: You can always go back if this is something new for you. You can try it and commit to it. But if it's not for you, you can always go back to what you were doing before.
I'd encourage anyone who's kind of on the fence about doing something they haven't done: go ahead and give it a try. It may change your life like it changed ours.
Thanks everyone for reading our Expert interview with Brad DeGraw from Amazon Sherpa. If you have any comments or questions, leave them below and we’ll make sure Brad has a chance to see them!
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