72% Of Ecom Brands Adopted AI And Saw Zero Financial Impact (With Andrew Youderian) transcript

72% of e-commerce brands have adopted AI so far and seen no financial impact. You is that what you're telling me? >> Yeah, this is this is the stat that Claude and Anthropic and and Open AI don't want you to know. Yeah, it's kind of crazy and I kind of make I mean I think it kind of makes sense when you think about it. It's so we're not really early early in AI but what Chad Chubt got released two and a half years ago AI has really started coming to its own in terms of mind-blowing capabilities in the past you know probably six to three months a lot of experimentation a lot of time invested in things uh and so like the ROI takes a while to pay off anyway I I won't uh go too much into the why but yeah that's what we saw when we looked at you know 300 brands looked at uh you know the ones that have adopted AI the ones that haven't grouped them together and looked at their kind of margin profiles and how much money they're making.

Yeah. The ones that have adopted I aren't really making, you know, it's not a big difference. >> That's interesting. So, it's not actually their self-reported like sense that they've made less money. You're saying when you actually examine objectively >> the financial outcomes of these brands, you look at the 72% who have adopted AI in some way. Now, that's probably a self-reported thing, right? We've adopted AI. you're not like you're not auditing their business but still the ones who who self-proclaim that probably actually selects for in well I don't know anyway whatever however whatever that selects for you you have 72% of them saying they have done nothing do you think do you think that's mostly about it being early or do you think I mean what's your read on that is because you have you have you run e-commerce fuel uh private community for e-commerce seven and eight figure e-commerce founders great community amazing community I've been a huge fan of ECF for a long time and of you for a long time.

So you also have access to the subjective data here which is like the forums because that's what ECF basically is, right? is a bunch of forums. And so you you not only have the objective data saying this is not making anybody money, but you also have uh you also have subjectively like the threads you're seeing people post and stuff like that like so do you have any sense of why you think I can think of a couple theories but why why do you think even people who are adopting AI for all of its apparent benefits it's not actually on average generating a meaningful financial differential outcome?

Yeah, I have a couple theories and quickly just to give people a little, you know, quantitative data, people who are adopting AI on average, you know, their net profit margin 12.7% uh non-adopters are about 12%. But the non-adopters are growing their income at like you know significantly faster than the than the ones who have adopted AI and and actually even like the revenue per employee is better for the non-adopters than the AI adopters which is kind of crazy >> but so I mean it's and it's not like massive amounts there's not big changes but uh it's so point is it's a mixed bag the people who have adopted AI are not doing better why is that the case I think a few things I think I think again like I said maturity level like when chat should came out, it was pretty mind-blowing that you could talk with a computer for those of us that have been around for a while.

Now it kind of feels common. Um, but you look at the last the coding functionality in the last three months, you look at the the level at which, you know, Open Claw Claude just recently came out so they can control your desktop. I I think part of it is it hasn't really got to the point where the the the learning curve, the time invested is going to pay off. Uh, you've had to spend so much time. Things have changed so fast. you learn something, something new comes out.

Things are same changing so quickly. The ability for for AI to really be excellent at automating CAS, I think has matured only really the last, you know, 3 to six months, especially last three months. So, yeah, I think it's and it takes a lot of time. Like even if you're going to go in and code something on your own, like let's say you're going to go code your own ERP or your own, you know, whatever it is, software, >> terrible idea.

Coding your own ERP is a terrible idea. That's the worst idea I've ever heard. But go ahead. a lot of the the number of amazing things people are coding in our community is mind-blowing. Like I would say probably every week we see at least two or three people be like, I can't believe I coded this and it's saving my my business real money. But the thing is there's a huge even with AI you know these projects take 100 150 hours 200 hours for bigger projects plus and they can have they can save you 10 you know five to six figures for bigger businesses but that's going to pay off over you know 12 18 24 plus months and you frontload the cost anyway.

So those are those are some of my my thoughts on why >> yeah go ahead. Well, it makes me wonder, especially for the founder being the one doing that in some of those bigger businesses, like is that really the best use? Like, I could see hiring an employee if you were a bigger business, >> but I mean, exactly to your point, the that payback period at five or six figures actually for a founder in a large enough business is not that much.

Like, you know, like if if you're running a $20 million business, is that worth your time or is it a better use of your time to try to figure out how to go from 20 to 30? Like, do you know what I mean? Like, I I it it almost feels like, yeah, it's it's sort of it represents a genuinely hard problem. I don't want to sound like I'm giving an oversimplified answer. Like, it's interesting to think about what the actual outcome possibility is for use of time on this.

And and it it I think it reinforces a little bit of what I what I see and think in general here, which is that the the actual way AI will benefit e-commerce brands is not is not as directly as people think. It's not it's not uh via I mean I'm sure it will I'm sure will impact their their brands positively in regular ways but for example service businesses like mine all the time that Patrick has put in building us an operating platform is now currently making our service better like it is doing that uh and there's this question of like we can at some point either increase our productivity on our on our current brands we can lower our prices like there's we can fix I mean there's and there's all kinds of ways you can increase productivity like so in that case what would happen is that the benefit to the e-commerce brand would be that it would pass through a good service business where the service business because of what it does is actually more poised to take advantage of the AI efficiencies and our service now gets better and passes it along because because our work is so processoriented that like AI is really good at replicating that process so and maybe not the only answer but that's that would be one of the ways it happens you know you've got Taylor Taylor Holiday tweeting somewhere at some point like a good growth engineer at some point might be able to service thousands of brands or something like that, you know, all at a time.

Now, I I don't totally buy that vision for a number of reasons, but I think like yeah, it's it's interesting to think about that possibility that that uh maybe that will be the the one of the ways that it happens. So, I I don't know. I don't want to oversimplify it. It's very hard to tell, but >> can I can I kind of one of the other findings from the report? Yeah. >> So, I >> you're a paid ads guy, paid traffic guy. I historically have been all organic growth.

Uh so I'm not objective, you're not objective. We both come at this from our backgrounds. But what the thing that I think was the coolest finding for me in this report was, you know, kind of long-standing narrative that paid traffic will kill your margins, right? Like you know, you got you got pay the piper and and it brings your margins down. And what I found was that companies who spend a lot on ads actually have very similar net margins to people who don't.

And that blew my mind. And what I found is diving into the data is winning with paid is all about having a business cost structure that supports the ability to spend a lot of money on paid. And maybe this is not news for you and people in that ecosystem. It was for me. And so when you looked at like it was all about, and I can pull up some numbers here in a second, the people who were killing on paid, their net margin were the same, but what they were great at was having really low opex and having fantastic gross margins, right? and then being able to take the delta of that versus the averages and pour that all into paid traffic.

Um, and so to me, going back to the AI discussion, if you even if you're early ballpark, whether it's services that are able to service agencies are able to charge less because of AI or in-house capabilities you build in house with AI that let you do more with less, like that's going to let you be able to compete and be able to pour money into paid. Another crazy stat, 97% of brands that were in this report were using paid traffic.

Only 3% like you can't survive today without some kind of paid traffic investment, which to me as someone who like, you know, grew up with, you know, bootstrapping band brands with a Google search and just kind of like gorilla marketing and it just made me really sad. That was like the saddest report I saw in this whole whole uh whole saddest stat in the whole report. Uh anyway, but I'll kind of but those two are tied in. >> Yeah, I haven't heard of the like zero dollar paid brand for a while.

Like you think about Band Holtz for a while with beard brand doing that with YouTube, but I mean he would certainly say that that sort of faded out in a way that became less viable for him. Think about Isaac Maderos and Mini Katana and them going that way again organic YouTube uh you know old days of organic social or like pay to post influencer which is technically paid but people kind of put it in a different budget you know or in a different bucket than like sort of programmatic paid or something like that and it is interesting that those are those are all just like you know Isaac sold mini katana at some point Eric is on meta you know [laughter] like uh it's like it's just interesting like I you're right it's it's it's you know it's table stakes as as part of the business and the brands that are great at it are the brands that have sort of organized around the strategy you said which is high gross margin low opex and and then being able to sort of think about using paid social to promote your business.

Um make the connection back to AI again. What do you uh what why did those two go together in your mind that way? Oh, I just think that, you know, in the future you were talking about doesn't make sense to have a founder be able to be, you know, thinking through and architecting this and spending all this time on AI and you can make the case for and against that. Um, but I do think for brands that want to continue to do well in the future, being able to have someone driving that really successfully at their company for outsized long-term results is going to help them be able to build the capex structure that helps them reinvest in the paid.

Couple stats on the paid side. So if you look at like people who self-identify as paid traffic experts as their competitive advantage as a percent of revenue. So if you take like revenue is 100% right like they spend 39% of their revenue on their cost of goods sold all in right like fulfillment product all that stuff. Everyone else spends 55% on that. And if you look at what they spend on their overhead, they spend 16 and a half% on their overhead compared to like almost 22% for everyone else. >> Um, so anyway, just that's kind of the breakdown that you're looking at. >> I'm really fascinated by that.

The So say the first one again. >> Uh, which first one? >> The first stat you said there. >> Oh, so for cost of goods sold. >> Yeah. >> Yeah. Uh so the people who selfidentify as being paid paid traffic experts, they spend 39% of their revenue on COGS allin uh for fulfillment and everything. Uh and everyone else spends 55% of their revenue on COGS all in. >> Hey, you watching or listening to this episode right now, don't forget to subscribe wherever you're doing that.

I have so many good episodes coming up coming up that you're not going to want to miss. Ezra Firestone coming on the podcast in a little while to talk about what still works after a whole bunch of years in e-commerce. I've got uh an episode coming very soon with my business partner Patrick about what we're building and what we're seeing across our clients right now. Uh Richie Mashiko from She's Bird. He's going to come back and talk about a crazy turnaround story.

Bunch of good stuff. Subscribe. Leave comments on this episode as well. I engage with every single one of them. Would love to talk to you there. Subscribe. I mean that makes sense. And and I I I think one of the things that you're seeing there is that Yeah. It's it's the reason that paid is not in the end negatively impacting margins like you said like like in the end that the sort of paid reliant versus not are doing that is because yeah people have designed their businesses for the for these kinds of outcomes you know um I think like in fact I even hear 16 and a half% opex and think still too high like I think that number needs to get down below below 15 at least and and I think there's a pretty good case to get it below 10.

Um, and that's not just with AI, that's with a few different things. But I think uh, yeah, I think it's it's really it's really interesting. And even that margin number is sort of similar to me where it's like 60 points of landed margin roughly for the paid folks. Yeah. Is is a really different uh, it's it is the case for running a lot of paid. Like I remember working with Simple Modern uh a while back on a on a project around their paid approach and they were an Amazon first business and it's it's pretty simple to figure out why which is that simple modern as they have said publicly uh came in really price competitive as a strategy on Amazon which means their margin was not very high their gross margins quite low actually uh for for a brand like this and then they added paid as a secondary strategy on the back of that to support some other things they were and really had to work hard to sort of claw some margin back in a way that made DDC make sense.

But it was it was the reverse order precisely because of those things which is like okay it was a strategy for a different distribution channel and some of those things. And I think brands need to be really clear about this like what is the actual way your business is structured and where is the actual advantage for you to go get go get value in the marketplace and and and where should you not be be leaning on those things?

In some ways I'm sort of jealous of the lower margin brand that is not so reliant on paid. like it sounds kind of nice in some ways. Um, on the other hand, I think the paid game is fun. I like advertising. I like, you know, I don't know. It's like it's a it's a there's a there's a pathway to doing it really really well there. So, um, so this probably uh I I'm sure both sides see grass the grass greener on the other side.

But, um, yeah, it's that's very very interesting. Do do you have any sense of what those those 55% or I mean I mean the uh the higher opex lower margin brands are like what kinds of businesses are they? Is there something about them that's different? >> Yeah, that that's a good question. I don't have it right here. All right, I could crunch numbers for you and get back to you on that, but if you look at the if you look at the trend from a uh a business model perspective, one thing that was interesting and it kind of ties into this as well is the number of manufacturers, number of people that are manufacturing, you know, uh three three or four years ago when I did this big report was about 40% of people and that jumped up from 41% all the way to 58% like almost a 50% bump. every other almost every other category, hybrid, private label, drop shipping, uh, reselling products either stayed the same or contracted dramatically.

So, uh, if I had to guess, I would say, you know, in terms of what businesses that have the overhead, they're ones that are probably doing those things, you know, uh, not not in the manufacturing because they just don't have the margin profile to be able to if you're manufacturing your own stuff, uh, you're going to have a higher margin which allows you to have that um, you know, that that cost structure that allows you to do the page.

So that would be my guess. >> Yeah, that makes perfect sense. Um, anything else pop out to you about about paid on this? What uh in terms of in terms of like and besides the fact that um that paid works for brands uh which I think in some ways is not news. Um anything else strike you as as significant about brands that are leaning heavily on paid versus not? >> Yeah, I think you know one of the things is and again I am not a paid guy. you probably have better insights on the paid side, looking at some of these results, but but one of the things that came out of this for me was like paid being great at paid isn't about having great rorowaz.

You know, I always think as someone who's kind of naive on the paid side, like hey, you look at so if you look at everyone the paid the self-described paid experts reported an average rorowaz of like two and a halfx whereas everyone else reported like rorowaz of 4x, right? So you'd think like just in a vacuum, oh hey the people those people are doing great. Well, not necessarily. My guess would be that part of that is they're maybe not pushing their campaigns enough, right?

Like the point with your point is not to maximize rorowaz. Your point is to get as much incremental profit and contribution margin as possible out of your campaigns. That makes sense. That's part of it. Uh and and the other part of it is just that uh yeah, you've got the margin structure to make that possible. So that that was kind of interesting. Uh that was kind of interesting to me. >> You are building an e-commerce business. you need help efforing your gross margins and you can do that with my friends at Move Supply Chain.

Move supply chain is a supply chain agency based in the Philippines. So they're affordable, keep that opex lean, while also doing the hard work of hammering away your supply chain and everything that means that could mean everything from finding additional manufacturers so that you have some redundancies built in your supply chain that you don't get uh caught at some point with something going wrong with one of your factories or a price increase somewhere and you've got no backup plan.

Uh move supply chain will help you get all the way through the sampling stage with backup manufacturers. They'll help take on that work for you. new product development uh efforts as you go and find new manufacturers for that sort of thing. Um negotiating things likeQS, like lead times, like cost per unit, uh all kinds of things like that. Setting up a 3PL's, including 3PL's in China, if that's an option for you. Move supply chains just seen it all.

They they're run by folks who have been in e-commerce businesses in the US for a long time, years and years and years of supply chain experience at huge scale, at small scale, everything from food and consumables to classic consumer goods uh that are sort of onetime purchase normal stuff. The other thing is that being in the Philippines is actually a really big advantage for you because the Philippines is an hour and a half flight to China to Vietnam.

They don't even really need visas. It's very easy for them to get to major manufacturing hubs to Canton Fair and places like that, represent your brand on your behalf, and actually even bring with them into any negotiation all the other brands that they represent, which just gives them more negotiating leverage as a representative of multiple brands. They're awesome. They're great people. I've used them and worked with them to build a supply chain myself.

Go to moveupplychain.com, get on a call, and see what's possible for you. have countless stories about ways in which brands have saved money, built leaner, better uh more effective supply chains with them. Go to moveup supplychain.com, get on a call, see if they're right for your brand right now. Two and a half is interesting. It's actually still higher than I would have guessed uh for for a lot of brands. Like I I think uh I'd be curious how they're even measuring that number because that's strongly first purchase profitable.

And I bet you that number goes down as brands get bigger in some ways. Uh I don't know if that's true but uh but you know the as the rule of thumb yeah the the the brands that are running heavy paid I think see paid as a volume machine first and foremost and to sort of again organize the rest of their business around sort of solving the business while keeping the volume low. That's a true rorowass number, right? That's like a that's that's not a uh that's not like an ME number or something like that.

That's like >> that's a rorowass number. Yeah. And we weren't able to ask Yep. That's rorowass. So yeah, a couple other interesting stat on the paid side. Uh so the ROAS for their top performing platform. So I I asked one thing that's tough you do these surveys and they're already like 50 questions long. So you got to balance like wanting to know every single metric in like a vacuum versus like killing people and just you know having them claw their eyes out at the end of the survey. >> Um but the rorowaz for top performing platforms Google was actually had the highest mean rorowass at 4.8 for the people's top reporting platform.

Amazon was 4.5 and Meta was three and a half. So that was the ranking in terms of uh what we saw for people who >> that's the brand search effect. That's that's just that just reflects >> that just reflects that uh not that Google's actually delivering a higher return. This that's a bunch of super ready to go traffic, you know. I'm certain that that's that's about that. >> Yeah. Yeah. And same that's same with Amazon, right?

It's like you got a lot of people searching your brand name, people who are about ready to buy. Um Yeah. Yeah. And then the metal one I'm sure also has some has some low low funnel traffic in there as well or just lower spends also as well. That is interesting though. Uh it's interesting point. Uh you were going to say I think you were gonna say something else about paid there. Oh uh I think that was that I think it was the only other thing that was on the paid side.

Yeah. Meta ads in terms of top source of traffic. Meta ads is the top source of traffic for like a third of people. Google Adwords is about 21% and then it drops off precipitously from there. But >> still >> that's interesting. I mean, I actually wouldn't have guessed because I and again, I think this is probably showing my bias towards just being in the meta world. So, I just talk to meta first people all the time, but still 20% of brands are Google pay, Google ads paid is still their top source of traffic. >> Yeah.

You want to guess what the third one is after uh it goes from Yeah. What would you say the third one is? >> Oh gosh. Are we allowed to include direct organic search here? >> Yeah, of course. >> I would say direct. >> Yeah, you're right. Direct word of mouth is number three at 11 and a half%. So, >> yeah. Yeah, it makes sense. Um, all right. Good. That I was I was going to be sad if I was like wildly wrong there. People were like, "This guy doesn't know anything." >> It's like It's like you got an advanced copy of the report, Andrew. >> I didn't see it.

I swear I didn't look. Don't do that to me. That was a straight up guess. >> I'm just kidding. I'm just kidding. >> Okay, that was [laughter] I didn't look. I promise. Um, okay. Uh, yeah. Let's talk Let's talk see anything else in the page that we want to talk about. I I am I am fascinated by that OPEX number. That uh that OPEX number for paid first brands is so interesting to me. I want to linger there for just a second. 16 and a half% of revenue going to OPEX on average is interesting.

That does mean that you've got a number of brands who are well below that. Right. If it's an average um did you do you have any distribution of those outcomes? I'm curious like how lean brands are getting. Like what are we seeing is possible for brands at this point? point and if you don't have that number handy that's okay but um but I'd love to know a little more of like you know what is what is the leanest bra you know what what is the sort of 80th percentile plus of of leanness for for brands >> okay so if you're looking at there's just a high level analysis of of uh overhead or capex the bulk of stores cluster in the you know 15 to 20% range so about 40% of all respondents are in that range about a quarter run lean at like 10% or below so there's like you 25% >> 25%.

Interesting. >> 25%. Yeah. Which is pretty good. >> Okay, keep going. >> And yeah, 15% are like 35% and above, which is just like a anchor that weighs down their profitability. >> Yeah. >> Um, so we can get a little bit more. Uh, so it looks like this is and in terms of revenue size, when you kind of get a sense of like how does that play into things, looks like the 25 to 50 mil tier stands out with 42% of those stores running fixed costs at 10% or or below.

So the 25 to 50 tier has double the rate of like really lean operators of all the other tiers which makes sense of like you get scale you get some you know you get scale you can distribute those fixed costs over a larger revenue base. So >> that's right. Yeah it's just it's easier to do that at that point that the I've anybody who's listened to the show for any amount of time has heard me say this a million times but a graphic designer who sends an email to 1,000 people cost the same amount as a graphic designer sends an email to one million people.

So it's just it scale like that kind of work scales extremely well. um you pay a little bit more to Clavio at that point, but like it's definitely not linear with it. So, um I think there's uh I I think there's a a real thing there, but I also think it's something brand those brands ought to be aiming at. And I think it's probably also part of what's propelling their growth, too. I think there's probably a cyclical element of that, which is that if you already start low, that means you have more profit, you have more cash to reinvest.

It's just a very big deal that brands get this right. I think really understanding internalizing this to me is the case for TODC as a business. It's like it's a it's really core to what makes the model work the same way that like retention rates and gross margin are the case for sa SAS you know or something like it's just like there's just um or or just like consumer software products you know it's to me it's it's just critical whereas high opex is part of that business um you know at least initially so I think I think there's uh I think there's something there that brands just continue to need to really really internalize and make part of their strategy is like how do I build operationally an extremely lean team to accomp accomplish uh my growth.

And if you do that, you'll be able to grow faster because now you'll have more profit, more cash, all of those things. And at the same time, u the benefit will compound because as you get more revenue, it will also make it easier to get there. So um yeah, I think there's there's all kinds of benefits. That's before you talk about the knock-on effects of things like, you know, probably having better negotiation with your manufacturers and some of that stuff like the scale just really really helps the business a lot. >> Yeah.

And I think like good good metrics. Uh, and one thing you can do too is is if you want to like be able to cross reference all of this, we got some really good benchmarking benchmarking data. You can go in and see like, okay, revenue, I want to compare myself to brands my size, my revenue tier, my competitive advantage. You can see how they look to kind of benchmark yourself. Uh, e-commerce.com/blint, you can get the full report and all the benchmarking data.

But for this uh looking at your P&L like a good rule of thumb like if you want to be great at paid the brands that are doing well at paid are running at least 64% gross margins uh for their product uh not just their overall cogs but the product and then 15 >> to the customer. Yeah. >> Yes. Yeah. And and 15% or less overhead. So that's like a good just very easy rule of thumb like hey how do I feel about that? Uh quick you know quick and dirty.

So >> I like that a lot and I think people should go get that. People ask this question all the time, you know, to me and intake things. What's good? What's a good number here? It's like, well, if you just read Twitter, you're gonna get a really skewed perception of that. But when you've got actually, you know, 300 stores here with a wide range of outcomes. It's interesting looking at the revenue outcomes for these stores, too.

You've got, you know, a real mix. The revenue distribution sits, you know, that the two largest categories are 1 to two and a half million and two and a half to 5 million. But then out from there, there's a bunch of stores in here that are 5 to 10, a bunch that are 10 to 25. Like, you've got four stores that are 100 plus. So you've got a really good range and if and five stores that are under 250. So you've got the whole range of the experience represented in these stores and I think it's and 300 of them is a lot.

So it's a really it's a really uh cool report. Um the link that Andrew just referenced is in the show notes. So um you can go follow that and and go get the whole report which I highly recommend. While you're at it go sign up for e-commerce fuel. Go join the community. It's awesome. Huge fan. Like I said it's great. Um ECF Live is actually one of the only like events I go out of my way to go to. I I I love it. So, it's >> Thanks, man.

It was good good having you good having you there this year. Hopefully, we can get you back next time. >> Yes, it was very fun. Um, okay. Uh, let's do let's talk one more thing on the marketing side, then I do want to move over. We're kind of already going to the operations and some of that side and there's a lot of really interesting operational stuff, but I want to talk about the place of Amazon uh in all of this. Amazon, in my experience being around you in the ECF world, >> everybody hates Amazon.

[laughter] Uh, like it's just like people just despise it. And yet, I also think it's this really valuable thing. But your data has something interesting. talk about how Amazon showed up in the report. >> So Amazon and again I have to I have to also go at full disclosure here. Uh two things to keep in mind. One, twothirds of the respondents here are brands from Ecom Fuel. Uh and not that we don't have people that are selling Amazon, but we we also focus on, you know, we focus on companies that have uh that that are not just Amazon only, right?

Like so that's part of it. Um definitely using Amazon as a sales channel, but they're not just Amazon only brands. And secondly, I got to be honest, like I've never liked Amazon. I I have respect for them as a as a company. I think the way their long-term thinking has been phenomenal. I think they have been uh from the perspective of a seller, I feel like that ecosystem has just been getting worse and worse for sellers over time.

And so I am not an objective, you know, you know, I'm not the UN coming in here. Let's just say that. Uh so, but what we saw, I think the biggest headline here, and then we can dive into a bunch of other nitty-gritty. Uh two things. One, channel sentiment. when you ask people like how much do you like this channel and I I asked do you how much do you like your channel versus feel neutral versus dislike different channels and DTC people's own websites was probably not surprisingly the overwhelming favorite like 92% of people liked the DTOC channel their own channel uh that percentage for Amazon was 17% of people liked selling on Amazon right 39% actively disliked it the only thing that beat it uh was selling on Walmart and Tik Tok shops people really hated Tik Tok shops.

Uh but the bigger thing I think is if you look at the percent of revenue that comes from Amazon over time when we started doing this report in 2017 back in the day about 20% of all aggregate revenue came from Amazon for the the group jumped up to 27% then 28% about and then it kind of started falling in 25% in 2022 and we are now back down to almost exactly the same level we were at 2017. And so the story that tells me is like people are looking at Amazon less as a absolute place to grow and build a business on and more as a place to to generate supplemental income, especially if they already have their own brand.

But based on the sentiment and based on just the revenue activity, I I think people are have finally started to be like, "Yeah, this is, you know, I'm a little more wary about this." Uh I think partially they've been racking up fees and jacking up fees on sellers for years. Uh I read something recently that only like 20% of new sellers on the platform uh for Amazon are in based in the US. You have a lot of overseas competition.

So anyway, a lot of numbers there. We can dive into it. But uh the numbers are painting a pretty interesting picture in terms of how sellers are approaching Amazon. >> It's a very fascinating thing to me. On the one hand, people's distaste for it is very understandable for all the reasons that you said. Their support's always been terrible for sellers. So >> there's a way of spinning that there's a way of spinning that story though to say that that's because Amazon is actually more focused on the end customer than the seller and and that they No, I wouldn't say I mean in some ways the sport's incredible for the customer, but um but the that they they're really comfortable with the idea that it's a that it's a blood bath that this sort of competition drives down prices and they want the best price for the best customer and they want people who are going to do all the things that you do to take advantage of the platform and th those people to win and they're Like I think there's there's an interesting way of approaching that.

The other thing I'll notice is that >> a lot of people express their hate for Meta as well. Um and Meta and Amazon have combined to make incredible numbers of sellers rich. Uh and and there is something weird to me about this which is almost like the thing that you get really close to that builds your business. You also like are the closest to all the flaws of it and all the things that are frustrating about it while sort of forgetting the fact that for example in Meta's case they have an algorithm that makes it possible for your product to only get in front of the people who are going to buy your product and nobody else and therefore make you rich and you get really annoyed when there's like a bug and they overspend or like when that dash dashboard on ads manager doesn't work well or in Amazon when they've built out this incredible fulfillment machine that is like 50% plus of all search so it's the greatest customer experience in the world.

It's amazing. I bought a product last night, showed up to my door, nine hours later this morning, you know, like that that's that's a real story that happened like right away, you know, like uh it's just like the the logistics are incredible, the price is incredible for all these reasons. Amazon is just and therefore they've attracted all these customers and so they've built this giant retail store that anybody can access anywhere in the world all the time and it's amazing and yet it's so frustrating, you know?

Um and it's and it's because that's where all the money is. So, you just give it attention. And I think Shopify doesn't quite get that same height heat because they're just a little more in the background. Like, first of all, Shopify is awesome. Like, I think they do an amazing job all the way around. But, there's just there's just it's just it's it doesn't feel like Shopify is the thing in quite the same way. It's like it feels like a a you know, a hosting service.

And so, it just doesn't it doesn't have the same level of thing. So, anyway, I I mean, I don't it's not to it's not at all to minimize like some of the Amazon stories are wild. They're so crazy. Um, I I get it. Uh, and if Amazon is actually contracting as a percent of sales, then that's interesting, too. And you could sort of imagine third-party garbage product sellers overrunning the platform in a way that um isn't good for the consumer.

That actually is sort of a short termism that does some of this. But, but there I don't know, there's just always an interesting dynamic between people's hatred for Amazon with uh the actual rep like the actual opportunity of Amazon, you know. >> Yeah. And I do think I mean I think there's still opportunity there very selectively like if you have a lot of branded search going on if people looking for your products on Amazon you should be on Amazon.

My my kind of theory about Amazon and worldview about it is it's become just a materially worse place to go to discover products right like if I need something super cheap if I need a USB cable shipped overnight awesome. Amazon's fantastic. If I want to buy a uh you know a pair of Nike shoes or you know an Apple laptop and for whatever reason I want to do it through the Apple website but even then I just order a new laptop do it straight from Apple.

Well-known brands I'm more likely to to buy there. But discovery like just random discovery of there's so much junk there's so much lowquality stuff. Um I do I do almost all of my discovery purchasing off of Amazon these days for kind of that middle ground. So >> yeah. >> Yeah. Yeah. I I I think that's I think that's fair. On the other hand, what I will always say to brands is people are all afraid of anibalizing of of Amazon cannibalizing your your DSC site.

And I just don't see that as like the major problem that that I mean for occasional brands that's the case, but there just a lot of brands where it's like uh I'm not going to buy it, but if I can get it for free shipping and it shows up tomorrow, I will buy it. Like I think there's so that stuff is that part of the customer experience is still incredible. And uh and I think it's it's easy to overlook that. I also think for subscription brands, it's it's still a really big win.

There's just um there's just a a lot there's a it's just way easier to to manage your subscriptions on Amazon than it is somewhere else. Uh and so yeah, I just I think it's a great way to do it. >> Only push back I'd say there is depends on what type of subscription. And I just bought something uh like a supplement uh last night and it was on Amazon, but I didn't want to buy it on Amazon or subscribe to it on Amazon cuz I didn't know.

I mean, maybe it probably is from that brand, but the key term is probably and I felt much more comfortable buying it directly from the website or subscribing to directly from the website there. So, in that case, I was like, "No, >> that's true. >> No way I'm going to do a subscription." And most subscriptions are consumable, right? So, >> right. >> Yeah. Right. >> Yeah. Yeah, I think that's a fair concern. >> Go ahead. >> Yeah, one more last thing on the Amazon front.

Um, you know, if you look at the revenue growth, it's also interesting. Stores not selling on Amazon are actually growing faster, 30% versus 23% who sell on Amazon. >> Yeah. >> And not surprisingly, their average net margin is significantly higher. It's 14, you know, 13.9% versus about 11 and a half%. So, >> um, >> that's a strong that's a strong anti-Amazon case right there. Yeah, they're not growing to income quite as income growth is about roughly the same.

A little little different, but anyway, uh just some interesting little details on that front. >> Um let's talk about operations in another sense like the supply chain side of things a little bit more. Can um can you talk about the impact of tariffs from this report? I think it's something that people have said a lot about, but um the the the question I'm sort of most interested in here is uh how much did brands raise their prices relative to their tariff hit? and and uh did did that really affect prices at least in this sort of selection of stores? >> Yeah.

So this is this is fascinating. A couple big things on the tariff front and so this is looking just at US brands uh who were sort of focused the the tariff analysis because they were the ones there is some definite impact on international brands especially you know Canadian brands as well too but this is just looking at US brands. So if you look at like I kind of looked at three big things across the group. one in terms of I asked people to to kind of give me a sense of how much did tariffs hurt your income for the year and overall across the board it was about you know 17 18% hit to income self-reported um people raised prices uh around you know uh raiser prices around 7 8% across the board but they took a big you know took a pretty big hit to those numbers actually wrong actually I redid this this morning bottom line is brands absorbed absorbed about 25% of the tariff costs.

So they passed on about 75% in terms of price increases but they but but you know 25% of them they kept uh they had to absorb which was was which hurt their margins. So that was part of it. Um if you look at like how many actually thought about moving their manufacturing to the US domestically because of tariffs it was only about 4%. So like 4% are actively moving their their supply chains to the US because of tariffs.

About 10% are seriously thinking about it. Um and about 30 35% are giving it some consideration and half were like nope it didn't make a difference not not thinking about that. Um last thing on this and then we can dive into more detail where where you want Andrew. I thought this was kind of the biggest takeaway. So I asked people like biggest what's your biggest struggle in business? This was at the end of the report like what are you most worried about right now?

And you'd think like 2025 people would be like tariffs this is my number one issue. Tariffs were like just a blip. Like the biggest thing hiring and team was number one by far. Growth in revenue was number two. Marketing uh you know growth in revenue and customer acquisition were like combined for yeah close second. Tariffs were like 5% of people said it was the number one struggle. So to me what that says is like I think that's more of a commentary on just e-commerce in general, right? like the biggest headline all year for ecom was tariffs and it's barely a blip because everything else [laughter] in ecom is just brutal at least in in some of these senses.

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It's fairly interesting. I I also wonder if they wouldn't feel that way about growth if they had better margins because their tariffs tariffs were not, you know what I mean? Like you could probably grow faster if you could spend more and you you know, whatever. So anyway, but if you're if your margins make that harder, um I I'm interested in the in the tariff question around how much those stores uh impacted their net margins.

Do you have anything about sort of higher tariff or or brands having 25% of the cost absorbed into the brand? Is that is that basically a reflection of a net margin change in those businesses or are you saying do you see what I'm saying? like like how do you sort of get to that number or and and maybe the more interesting question to me is did tariffs actually negatively impact net margins over the year because that would be a sort of fascinating finding if it's like yeah the tariffs are there but actually nobody's net margins really got hurt or growth rates got hurt like any year-over-year comps to affect to indicate those things. >> Yes.

Uh so a couple things. Um one of the biggest trends long-term trends that you're seeing and this was this was exacerbated this year especially based on a couple years ago when we did the report but it's been a trend that's been happening for the last almost decade. If you look at gross margins, so gross margin again, how much you have after you know what your margin is uh for your products your gross product margin those you know 10 years ago uh were like 39% and they've gone up to almost 50%. uh partially because so many people have moved to manufacturing which is a higher gross margin business right so you see gross margins increasing at the same time net margins how much you keep at the end of the day after everything's all said and done have gone you know 9 years ago from 17.7% down to 10.6% and even from just a few years ago they went from you know like about just north of 15 to down by 10.6%.

So, so yes, you do see I don't have year-over-year data, but on a multi-year and a definitely almost decade, you know, trend line, uh, you're seeing this diversion of diversion of margins of like, you know, the opening the gap, which is kind of surprising. I think at least over the last two or three years, margins has definitely played played a role in that. I mean, if your gross margin if 25% of your tariff of your product costs you're not passing along to customers, that can't I mean, there's no way you're going to escape margin compression. >> Yeah.

Is there any anything related to that to the to the sort of non-percentage uh margin difference? Because one one case you could make is that the is that the reason the percentage margins have gone down so much is that stores are getting a lot bigger and they're basically making a making a purposeful trade. uh you know, they're saying like they were they were a $4 million store with 17% margin before and they're going like, >> "Hey, we could actually be a $15 million store now with >> uh you know, with 10%." I don't I think I did that.

I don't know if I did that math right, but whatever. You get the idea, right? Like, >> yeah, >> you could imagine a brand going like, "We want to grow faster. We're willing to sort of invest in that, and so we're going to take a a lower percentage margin and a higher total margin." Now that that's that's a tough trade in e-commerce because uh the cash management in that in that process you're just you're playing the game on hard mode.

But but uh but I'm just curious if that if you see that you know >> when you look at like what cohorts of revenueized brands are passing their margin passing the cost of tariffs at least along. Um the small brands do a really good job of that because they're probably in startup mode, right? Like they're they're leaner. They don't have customers that are as uh they're just younger. They can they can move more quickly.

They don't have as much history or or memory or or maybe a version or as much to lose. Uh but under a million did a great job. They passed almost almost effectively all of the price increases along. You get into that like $1 million to $25 million range and those are the ones that are passing the least amount along. Uh you know, they're passing they're getting hit with with with much more of that almost, you know, much more than that 25%.

Uh, and then you get 25 million and above and those brands again are starting to optimize more. It seems like for profit they're doing a better job of of passing the cost along. So that's a rough answer. It's not it's only limited to tariffs. Uh but but maybe speaks a little bit to that. But again, we happy to dive into that too if you want. >> No, that's okay. I I mean I think I think it's it still makes sense. And um in general, this gets us towards a couple of other things that are interesting.

When you're talking about margin profile for an e-commerce business, you're also you're you're talking about actually cost delivered to the customer. So, I'm curious what data you have about people who are 3PL versus 1PL. Basically, like are people warehousing their own products? It seems to me that everybody is under 3PL now, but uh like it didn't used to be that way. I feel like I feel like people used to ship themselves and maybe everybody figured out that it was not the best use of their time.

What what does the data show? >> So, this was kind of really interesting too. So, if you look at So, we got about 300ish ballpark brands. uh of the people we have data for the number that are outsourcing the fulfillment either 3PL FBA or a combination of the two is about half about 153 people uh about 90 of them are leasing a warehouse so actually fulfilling on their own but they lease it and about you know 60 of them uh so 20% own their own warehouse and one of the things that was most surprising to me as well was owning a warehouse was a very large determinant of uh not doing as Well, especially on the growth side.

And I don't know if this was because uh because and even even when we controlled for business size, right? Like you'd assume like, hey, businesses, they get bigger, they generate cash, like where am I going to put this? Uh we're going to invest and buy our own warehouse. And that's kind of a a correlation between businesses who have slowed on their growth and have extra resources. But even when we controlled for the size of business, this still uh this still came up.

And so if you look at like average revenue growth for people who if you own your own warehouse, your average revenue growth is like 4%. versus 30-ish% if you, you know, lease or outsource. Uh, your net income growth is 15% if you own your warehouse versus about 40% if you lease or outsource. Uh, even your net margin is a little bit smaller. You know, not as much, but you know, 9% versus 9, you know, 10% or 9.3 if you lease or own.

Um, another thing that's interesting is like your inventory as a percent of revenue is also much larger if you have a warehouse. and your turns are uh are also uh impacted. So anyway, it was kind of it was just interesting because I I did not expect there to be that much of a drag of owning your own warehouse. So to your point like everyone starting to do their you know to have someone else do the fulfillment is very much shows up in the data and it seems like there's it's a pretty meaningful performance bump if you're not having to manage a warehouse or at least own one. >> Do you think that there's do you think that's causal?

Do you think that the warehouse is dragging people down or do you think it's like selecting for people who are maybe focusing on the wrong things or like what do you what what's going on there? >> Yeah, that's what I wondered that too. But again, we controlled for revenue. So in these results, this is people that are only uh$1 million to$10 million in sales. And so you'd expect like okay, this would happen if you included a lot of the big players in there.

And if you had uh but but if you have that same if if you have that tight of a revenue threshold and you still see that results, that's what made me think, okay, maybe people are getting overextended and they're having to put more towards their warehouse payment and they don't have as much from paid marketing. I I definitely think there is part of it. There is some, you know, correlation between you're more mature, but but the fact that we're controlling for it makes me think there's actually something there, too.

So, >> like it's actually causally dragging you down. like essentially like you you might just be doing that. I mean I've the thing is like running a warehouse is hard and it's it's it's at times it and you you hear this especially from people who stopped running their own warehouse like that what their experience of the before and after I I always think of Bill Aleandro talking about this like they ran their own warehouse fulfilling their own stuff when they had a bunch of brands and all this he had good people doing it and eventually was like oh man this is so nice to get rid of this.

I had I had another client who's also a ECF member who uh won't be named but who so the same thing like they had their own warehouse they got rid of it and it was like they've had a number of problems with 3PL but still they would never go back you know and it's it's just yeah it's it's just it is there's a reason why it's its own separate business. It's like it's like having your own manufacturing. It's like it's a different business to run and there are some cases in which it actually does make sense to learn the skills to do it but those cases are pretty rare and uh and and not really what most people should be doing. >> Yeah.

And it's tough too like if you think about who's going to be most likely to own their own warehouse. If you have fewer SKs, it is easier to have a 3PL manage your fulfillment with fewer problems than if you have a ton of SKs. And one thing that would be really interesting to do, and I did not do this, but I I'm kind of curious about it. There's a difference between companies that are growing quickly and companies that are durable, right?

Like if you are there's a big moat if you own a massive warehouse and you have every single replacement part for you know I don't know some obscure model train line or model train enthusiasts maybe you're not growing at 40%. But you've got a massive moat even if you have to tie up more capital and so your business is going to last you know it's more defensible in a on a 10 15 year duration versus someone who's scaling really quickly. they got three or four hot products fulfilling quickly out of a 3PL.

So I you know this is part of that data uh but it doesn't measure the durability because there is like having a great fulfillment with niche product line having the capital to tie up in that uh maybe you trade some long short-term performance for longevity. Okay, rapid fire and then on some of these things and then um and then and then I want to talk a little bit about sort of an overall picture of the business at the end and I think something that you've listed here that I think is a is a really good takeaway.

Okay, so let's talk about age of AI adoption. Uh [laughter] this is a fun one. This is a fun one. What can you say about that? >> So this is crazy. people in their 50s are adopting AI at a faster rate than people in their 30s which a seems crazy. Uh but once I saw the data and I started thinking about our community and and thinking about the people who were building really cool tools with AI stuff I was like yeah I pattern matched a couple and I was like yeah some of the there's some people in their 50s that are making amazing stuff.

So anyway uh counterintuitive but if you're in your 50s more likely to adopt than 30s. >> Really interesting. Uh it's also interesting though because the AI adopters are not seeing a financial reward from it. So it's like uh like one one thing I thought about earlier with that stat was maybe maybe the maybe it's the shiny object syndrome problem that more experience would save you from but maybe not because it's the older people who are actually adopting it more.

So >> or or the judgment of I mean that's just adoption but or maybe maybe the people that are older have better judgment on what to apply it to so they see faster rewards so they stick with it more. I don't know. Uh, remote versus inoff, who wins? >> Remote teams are actually growing their profitability faster, which kind of makes sense. Uh, but they're not growing topline any faster is the quick little takeaway. >> Oh, interesting. >> Yeah. >> So, well, but are they growing topline slower? >> Uh, no.

It's about the same. >> Well, okay. So, but but if it's about the same, then what that says to me is it's pure savings. >> Yes. It's it's no impact on it's no this see this is the case that I think people just have got to keep making which is like run a really low op extra percentage of revenue and then make it lower you know like you know what I mean like just keep digging into it there's there's ways in which this is the case most of us are bad managers and so it's it's like you don't the idea of just adding a bunch of people is hard anyway okay at what stage of business Andrew are brands seeing actual financial reward from their from their e-commerce businesses is like how big do they have to get before they're actually seeing real money from it? >> Yeah.

Yeah. You've got to get into that kind of mid to upper 7 figures range, you know, like five, six, seven million. And even more importantly, you've got to slow down your growth uh to down to like to that 15ish% topline topline level. That that was one of the really interesting things. Um >> yeah, say more about that. That's so interesting. Yeah, because you think about like part of it's part of it's pretty intuitive, fast growing ecom businesses just suck up cash and even if you're doing a great job of using uh >> sure sure >> you know capital, you know, financing it well smartly, you're still it's just you're still growing your opex, you're still growing and so you have to slow down growth to be able to start cashing things out.

Um, but the sweet spot, uh, kind of the sweet spot about who was taking distributions was a small salary. A salary plus small distributions seemed like it was the sweet spot for people to be able to like take money off the table, uh, be able to keep growing in their business, be able to be more intentional uh, about how they reinvested the the funds that they had left, right? They had to be a little more careful. Um, but but yeah, that was kind of the point in terms of rapid fire.

We can get into more of this if you want, but that mid to upper seven figures growth in the 15% range was where people could really start taking, you know, more dividends. So, >> I have been team growth slower for a little while. Uh, and and it's for exactly this reason. It it's it's the combination of things. One of them is I think you're less likely to kill your brand. You're less extinction events are much less likely. uh and uh and you also can take money out of the business and because you know and those two are for the same reason, right?

Which is you just have more cash on hand uh etc. Okay. Um couple a couple more rapid fire ones. Uh what types of businesses feel or operators or whatever feel the best about the current moment and what ones feel the best about the future? Uh so this is like the hope index basically. Uh who who is it out there that is like feeling really good? What can you say about them about where things are at right now? Who feels really good about the future? >> Yeah.

So, I'm going to go through a handful of metrics. I looked at like the optimistic owners versus the pessimistic owners. So, uh generally I would say in general owners were more optimistic than I expected, which was super cool to see. Um >> can't be an entrepreneur if you aren't that. >> Can't be an entrepreneur for better for worse. You know, like 40% of people were like optimistic like nine or 10 out of 10, right? uh 40% of people were like cautiously optimistic, seven or eight out of 10 and then only about 20% were six out of 10 or lower.

Um but if you look at the things so optimistic owners versus pessimic owners, they have higher conversion rates. Uh uh inventory turns per year was a big one, 4.4 over 3.3 uh because it makes sense. You're turning inventory faster. You have less talent of working capital. Same thing for inventory as a percent of revenue like 12% versus 15%. Uh the number, this is a big one, uh optimistic owners were were were pessimistic owners rather were twice as likely to own a warehouse versus optimistic owners, [laughter] which is just rough.

Um fixed overhead as a percent of revenue. Uh pessimistic owners were at 25% versus 19% for optimistic owners. So again, going back to that beating the drum of building a lean machine, uh the number one struggle for optimistic owners was hiring and talent. And the number one struggle for pessimistic owners was margins and costs. So just a little little sample there, but those are some of the high points. So >> that's good. >> Okay.

All of this gets >> one more thing. Can I one more thing? >> I thought this was interesting. >> Hopefulness in terms of owners, in terms of who was most optimistic >> increased almost perfectly based on revenue. So like the bigger you get, the more hopeful you become. And part of that might be intuitive like you have more stability. But I also think like we're in an era where because attention is getting more expensive just increasingly over time.

Like if you have it, if you're an incumbent, you have an advantage in the environment. So I thought that was interesting to see how that scaled. >> Yeah. Also, uh I've told the story before too, but there's an old uh story about when the Cleveland Indians or Guardians or whatever they were called at the time won 20 games in a row at one point a few seasons back. And there was this story in some sports publication about how they the most amazing thing about the team was not their win streak.

It was their locker room environment that you know that was their side talking about how they were just like this amazing locker room. And I that's the the dumbest idea for a story I've ever heard because if you win every night, of course everybody's happy in the locker room, you know, like [laughter] uh you know like like if that would be a remarkable story if they were losing all the time. But but the but like you everybody feels good when you win and so the idea that you're more hopeful with more revenue is like well yeah of course you know like you're feeling awesome about things if that happens because yeah it's not going to be a perfect correlation but that's that's the case.

I think the more interesting one is what is is something you have here related to age which is that the the young and naive appear to be the more the more hopeful ones than the old the old folks right [laughter] yes that I mean and I think this is maybe just I don't know if this is I don't know you could say this too you could say this is just a built-in feature of entrepreneurship like you're young naive you've got hustle you see the world as your oyster and this has always been the case you could also make the case that like hey ecom has just materially changed differently and People that are younger have a better grasp of what's working now versus people that, you know, have been doing it for 10 or 20 years and are locked in their old why isn't my SEO working anymore.

And no offense, I I'm an SEO guy. I'm I'm more those days, too. Yeah. I don't know which one is, but you see a very strong decreasing correlation between hopefulness by age. Like under 30, you're 8.4 out of 10 hopefulness. >> 60 plus, you're 6.4. Like it's just, you know, like meaningfully different. So >> awesome. Um, okay. And then uh let's do one last thing which is uh which is one thing that you've highlighted to me separately which is that one of the overriding things that you can see in all of this and and I think a lot of this a lot of our conversation so far gets at this which is which is that uh that ecom is hard and requires I mean you're referencing very casually things like inventory turn working capital you we're talk we're talking a lot about um opex strategies fees and even capex to some degree and like there's all of these different elements of what makes uh you know warehouse fees all of what makes an ecom business what it is.

Talk about financial sophistication among this group and anything you can say about that. I think this is an interesting point to end on um because you're a finance guy. This is like this is where you live I think and it's certainly one of the things I feel like I hear you speak with the most expertise about. Uh, so I'm really curious to see sort of your read on the environment of these store operators and what people can be doing better, what they're already doing well, and sort of where the future is for them there. >> Yeah, I think if there's one thing that you as an owner and an entrepreneur need to understand as well as like the two top things you should focus on are of course your product, your customers, industry knowledge.

That's just table stakes. But right behind that, I wouldn't say marketing is number two. Although you might disagree kind of in a marker seat, I say the next most important thing is just deeply understanding your numbers and having deep financial fluency. And so the reason I say this partially I'm biased. I'm a financial guy. But when you look at the data, I asked all of these store owners to rate themselves. What is your financial fluency?

Like how confident are you in your financial knowledge out of a scale of you know five stars? Um and you would think like okay four out of five, three out of five stars need some work, right? like two or one obviously going to see some some real negative correlations. But when you think about like the difference between four star and five star, you'd be like, "Okay, maybe there's a small difference there." But like if I'm four out of five financially fluent, that's pretty good, right?

But what I found in the data was like the difference the jump between uh like three out of five and four out of five were actually pretty close. And it wasn't until you people reported being like five out of five like I feel very confident in my numbers that you saw this massive bump up in terms of performance. Like for example, if you look at the average net margin of someone who's a three out of five, it's 10%. Four out of five is actually 9.4%.

You go to five out of five and it jumps massively to 12.9%. A huge bump, you know, like 30% plus increase. Uh if you look at the percent of people who are able to extract capital, right? Like you go from 37% of people who are three out of five fluent to 56% of people at five out of five. Um if you look at like you know personal runway by business size you see this you see this in terms of net income growth uh you see this all across the board and so I think what the big takeaway for me and this was also here's one of the other things too that's interesting I controlled this uh you know the net margin kind of thing um I controlled this for actually this becomes even more prevalent when you control for business size.

So, one of the things when you're always trying to do this is you're trying to think just like the warehouse thing we talked about, Andrew, is the reason that people are more, you know, are growing slower if they own a warehouse because they're more mature. So, you try to control for these things. So, I when I controlled for just people that were in a 1 to5 million revenue only business size, the differences were even starker.

If you're a four out of five financial knowledge in that in that cohort, you have a 9.7% net margin. If you're five out of five, it's 14.3%. And so like your the amount you're able to extract from your business goes up by 50% if you go from decent at finance to excellent at finance. And so anyway, we can get more into the numbers here, but for me, this is like it's just so interesting. It's also one of the reasons I've just recently wrapped up uh a big series and course on financial mastery for ecom entrepreneurs that walks through everything from the basics to understanding the financial levers in your business to understanding how much you should invest, you know, pull out of your business, invest outside of your business, like the whole path of financial mastery.

And if you're interested in that, you can get that uh course. It's free at e-commercefuel.commastery. It's an eight-part course. Um but yeah, to me >> eight part course on that for free. >> Eight part course for free. Yep. >> Incredible. >> Um but yeah, I just to me that was such a stark uh difference between the four out of five and the five out of five. >> I came into e-commerce probably at a one uh in terms of financial mastery.

It was really really low. learned that one of the things I've been amazed at in life is is how much there is to grow in this area and how much mastery there is and then also uh how much how much it has had an impact on my personal life, personal finances. Uh and so the benefits of it >> I've just come to really appreciate the notion of doing the hard work to generate mastery on things that have outsized impact in your life in general. um you know it's just it almost everything works that way and when you get it what you end up with is a skill set and I would say I'm probably four right now on on true financial education like I think for for an ecom brand or whatever uh I've found that that if you generate that kind of knowledge for yourself which happens with experience in part right you you you do that with your personal finances you do that in your business all that kind of stuff the more that you do that the the more It drills a kind of thinking into your brain and into your life that has shocking amounts of impact all over the place.

You'll find suddenly that you're more helpful to your friends in certain conversations. If you're involved in a church or something like that, you can be more useful as a contributor there, you know, or a foundation that you're on the board of or something, you know, if you're involved with just all of these little areas in life where these things cross over so much. So, um, and that's before you talk about like being able to pull money out of your, you know, the obvious things, being able to pull money out of e-commerce business and stuff.

So, I just love that. I love that. It feels like a good challenge and and uh and nudge towards like, hey, go get this knowledge. You will it will be worth a whole bunch of money for you. Andrew actually has it and gave it to you for free on his website. Go there and go get it. The link for that's in the show notes for sure. Um as well. Um so anyway, thanks thanks for that last uh note there, Andrew. Uh any any final final things you want to say here?

Anything like that? Uh, I would just say to everyone who participated in this, thank you. Uh, I mean, sitting down, hammering out 50 financial questions and business questions from something like this. Um, yeah, it's a big deal. So, thank you to everyone who's participated in this. Thanks to the operators, they helped partner up on this uh, and, uh, and and spread the word on it. Um, yeah, and then if you know, if you want to get if you want to get a full copy of this report, it's it's super in-depth, a ton more charts and stuff we talked about.

We we had a chance to maybe probably cover half of it as well as the benchmarking data in the back and kind of a all the lessons each section I tried to lay out like hey what does this data mean for you not like oh hey here's some stats and figures but like what are the implications for your business what should you do um e-commerce.comb blueprint if you want that financial mastery for ecombuilders class it's uh e-commercefuel.commastery and then yeah if you're an ecom uh podcast listener which you are because you listen to Mr.

Ferris uh do a weekly podcast as well. Uh the Ecom Fuel podcast if that sounds interesting to you. It's talking about a lot of this kind of stuff. But uh >> literally >> literally the first ever podcast I listen to in e-commerce. Still one of the only ones I ever go back to and and listen to now. It is it is great. Everybody should go listen to to your podcast as well. >> Dude, thank you, man. I enjoy yours as well. It's always fun to especially on the paid side.

Like you know that world so well, man. It's always good to to try to combat my biases of which there are many and unfounded. So, >> can I can I read some titles of some uh some current threads in ECF because they are reflective of of the things that we're talking about. So, everybody should go join ECF right now or is that >> Yeah, as long as they don't like out any like business specifically. Yeah, go for it. >> They're not going to uh Yeah.

So, you talk about financial sophistication. There's an amazing thread right now about a guy who is pulling money and going and buying commercial real estate as a tax related strategy and he gives you all the details of why and how to do that. that thread is getting quite a few eyeballs. Uh, which is really interesting. Um, and it's just it's exactly one of these things like having a deeper understanding of how the tax system works and what the advantages of doing that are.

Um, yeah, it just just tells you right there how to do it. Incredible. Um, an exact playbook for how to get refunds from tariffs, which we talked about. I think that was insanely cool. Somebody posted like here's what you do because of the Supreme Court judge judgment on tariffs ruling uh them unconstitutional. Like here's how to get your money back. Uh that's that's amazing. Um and then uh and then what was the other one I was looking at?

Oh, yes, an evergoing ongoing 677 comment Facebook performance issues, you know, because it's always those. [laughter] >> So, I'm engaging in there a little bit as well, trying to help wherever I can be of a threat as well. Just people people talking about like what's going on on Facebook today. So, uh anyway, there's there's a lot of good stuff there. People should go join ECF uh right now, e-commerce.com, and go check that out.

All the links for all this, for ECF, for the full report, the financial course, uh, for the podcast are all in the show notes, so you just go do all of those things. Pretty much all it's also at e-commerce school.com. Um, you always great to see you. >> Oh, Andrew, thanks for having me on, man. This is a blast and appreciate you uh, yeah, talking through the stuff. It's always fun to geek out. >> Yeah. >> Don't forget to subscribe wherever you're watching or listening.

Thanks so much for doing that. Thanks so much to Andrew for putting together this report. something I look forward to every year actually seeing kind of all the data, what's going on really in e-commerce across quite a few stores. It's really really cool. Uh you should uh email me any thoughts you have, any questions you have about this episode. Podcast at ajfgrowth.com is the place to do that. Or just leave it as a comment here.

I read and engage with and reply to basically every comment. So would love your thoughts or questions there. Uh go to ajfgrowth.com if you're interested in working with me and my team on your business. Would love to hear from you uh if that's the case. And of course, a big thanks to my sponsors as always. Move supply chain to get supply chain help in your business and Intelliggeems. Uh movechchchchchchchchchchchchchchchchchchchchchchchchchchchchchchchchchchchchchchchchain.com intelliggeems.io with the code ferris 20 to get 20% off your first three months at intelliggeems.

Links for those are in the show notes. And uh thanks so much for watching or listening. Like I said, I'll see you next