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Get Positive Cashflow More Quickly Through Wholesaling With Ecommerce Expert Dillon Carter
On this episode of the Quiet Light podcast, we speak with Dillon Carter about his path to launching a wholesale CRM, why he pivoted to a slighted different business model, and how his company helps their clients succeed.
Dillon Carter is one of the founders of Aura, a wholesale CRM that helps you with repricing, managing wholesale suppliers, and growing your Amazon business. Tune in to hear our interesting discussion!
- How he floundered before finding his true passion.
- Launching a wholesale-based CRM software, before pivoting into repricing software.
- Explaining wholesale.
- Working with an antiquated business model.
- What happens when everyone is using Aura at the same time.
- How Aura works.
Joe: Hey folks, Joe Valley here from Quiet Light Brokerage and the Quiet Light Podcast sponsored by Quiet Light Brokerage, oddly enough. Everybody here is an entrepreneur. We’ve all built, bought, and sold our own online businesses. I sold my last e-commerce business in 2010. Things have changed a little bit since then. We’ve got to Dillon Carter on the podcast today. Dillon is one of those changes. He was; well, let’s see, 2010, you were still in high school back then, weren’t you?
Dillon: I graduated in 2010, yeah.
Joe: That makes me an old guy or you very good at what you do at such a young age. Probably just that, I’m going to call at Syed Balkhi right now. Syed I think might have just turned 30 years old and referred a client over to me so I was just chatting with him earlier today. Incredibly impressive at a young age and I’m looking at your LinkedIn profile, I’m looking at Vendrive, I’m looking at Aura Repricing and, man, you’ve got a lot going on in your life. Can you help people that are listening, who you are and what you do and summarize or give more detail to that summary that I just gave?
Dillon: Sure. So I started out graduating high school not knowing what in the world I wanted to do, like most entrepreneurs. So, I kind of floundered for about four to five years, just testing a bunch of different things. I found myself being a personal trainer, working ridiculous hours and realizing I did not like a service based business because that’s kind of difficult to scale. I realized okay, physical products is something that could theoretically scale in my mind at that time so I started playing around with the Amazon FBA model. Like most people, you get started with retail or online arbitrage, right? Low capital requirement, you could kind of test the waters. I did that and eventually me and the GM of the gym I was training at did not see eye to eye so I decided, you know what, let’s go ahead and put myself in a corner and make it work. And so, eventually I decided retail arbitrage, although was better than being able to scale my time so I could not scale in the way that I wanted the business to. So like most FBA sellers, I decided to either go the wholesale or the private label route. I chose wholesale. It made a little bit more sense to me; low capital requirement, I could start paying the bills immediately because it was certainly an issue that I was faced with. I went that route and really spent a handful of years just crafting what wholesale meant to me, how I approached it. At the same time, I decided to go back to school full time for college. So it was one of those lingering aspects of my life where I was like do I really want to be that statistic where you took a few semesters, you kind of dropped out, and never went back. I’m like, no, I’m tripling down on my life at this point, no holds barred, and so that’s what I did. And then eventually I met my co-founder, James. We eventually launched www.Vendrive.com, which is wholesale-based CRM software and then pivoted actually funny enough into repricing software. And that’s our primary focus at the moment. So I’ve kind of traversed this world in a few different ways. I launched a podcast or two here and there. I shared all the knowledge that I’ve gained along the way and the podcast and blog posts and our Facebook group I mean, really just somewhat built an audience just teaching everything for free and I learned a lot from that. It’s been a long journey, so to speak, but I feel like I’m just getting started.
Joe: That’s the way to do it. You help, help, and help some more. Give it all for free and make some friends along the way. It’s amazing what you do when you help others, how it comes back to help your own business. In fact, we had Steven Pope on our podcast. I think he’s www.MyAmazonGuy.com and so did you and he connected the two of us together. Strangely enough, I told you at the beginning of this call or before we hit record, that I sent a message out to the team that we just don’t have enough wholesale guys; men, women, people, individuals, entrepreneurs on the podcast, because we have not historically sold a ton of wholesale businesses. But it’s a funny thing, I come from the private label world. I didn’t sell on Amazon. When I sold my e-commerce business it really wasn’t much focused on Amazon. I did after that, but it was always my own products, always private label and some people look down on wholesale. At this point in my career; not that I’m going to change what I do, but if I were, I might look at wholesale before I look at private label. I might look at an agency before I make a private label. I might do a lot of different things. I might even look at content. But why don’t you, for the sake of those that are listening, that are not as versed in it as you are define what wholesale is versus private label and how it works?
Dillon: Sure. Wholesale is a very antiquated business model and I don’t say that in a negative tone. What I mean by that is you are buying low and you are selling higher. You’re literally finding listings on Amazon that are already doing well and you are doing what we call reverse sourcing. So you’re finding listings already doing well, finding those brands, those products, and then you are going to the brand to open a wholesale account to purchase in bulk like pallets and stuff like that. It’s actually very straightforward. There’s nothing crazy to it. The difference here because you made a good point that a lot of people don’t view the wholesale business model as a sexy business model. That’s not your quote but that’s kind of what I hear and you hear it a lot. And I think the reason why you have not sold a whole lot of wholesale Amazon business models is because the multiples are not that great. So, when I went back to school, I actually went to be finance major and so my focus was actually M&A. So doing a lot of valuations, some discounted cash flows, kind of nerdy stuff. But when you look at it, those businesses are easy to replicate. There’s not a lot that you’re really protecting, right? There’s not a lot that I can really build up and get a decent multiple on. And so, I think they’re very great in the sense of I can get cash flow positive within 30 days if you kind of know what you’re doing and you’re being serious about it. Right. Whereas private label is going to take a little bit more time. That’s an investment for the future. I view a wholesale business model as a cash flow business where private label is more something you’re looking to expand the value of your equity over a long period of time and potentially exit and so, it depends on what you’re optimizing for.
Joe: There’s definitely a difference between the two, because the private label businesses that are growing like crazy, those folks are not taking a whole lot of money out of the business. They’re constantly putting it back into inventory to try to keep up. But you said you said sourcing by looking out in the marketplace; Amazon, if that’s what we’re talking about, to see what other people are selling and then sourcing the product from the brand owner. So, we’re talking about brands that have multiple sellers on Amazon in this particular case and you are then going to compete against the other sellers on Amazon as well, correct?
Dillon: That’s correct. Absolutely.
Joe: All right, that doesn’t sound very attractive. How do you compete against the others? How do you do a better job on your listings and your ratings and reviews and your pricing and things of this nature?
Dillon: This is where it becomes an antiquated business model, in my opinion. And again, not in a negative tone where it comes down to relationships. So, a lot of people are jumping into the Amazon space want that lifestyle business, right. What a lot of people kind of project as this is what it’s like to sell on Amazon. The reality of it is it’s a lot of phone calls. It’s a lot of old school relationship building. It’s understanding that…
Joe: We all have to do that.
Dillon: I know right.
Joe: It’s now like rocket science. Yeah, it sounds much simpler than trying to figure out the thickness of a corrugated box that you’re going to import from China.
Dillon: 100%. I’ve said for the past three or four years that wholesale is simple, not easy. It’s simple enough. I mean, we can sketch the entire business model on a napkin, and I’ve done that. It’s not easy because it’s a lot more work. Now, that’s not a bad thing, right? This is not sending a bunch of emails to manufacturers in China and playing that kind of game. This is actually jumping on the phone and having a real conversation with somebody. What’s different about wholesale and why it’s uncomfortable for a lot of people is that you are essentially doing a sales job; you are calling a brand to sell them on allowing you to give them your money. It’s a bit backwards, right? But that’s kind of what it is. And so a lot of people get stuck where they jump into these relationships and they’re trying to get these accounts and they’re like I keep getting denied. Why won’t they take my money? I’m trying to give them money. And what a lot of people have to learn, first and foremost, is the value add that you are bringing to the table is not your money, it’s the relationship. What else can you do for that brand? Because what you’re not doing is necessarily just jumping on the listing and taking another slice of the pie. You’re strategically looking to increase the sales volume here, right? You’re looking at running PPC campaigns, you’re looking at listing optimization, and you’re looking at how can I help my supplier negate other sellers. I keep going below minimum advertised price so, mat price. You’re looking at this as a very strategic business model if you’re doing it correctly and I think a lot of people view it too simplistically. And again, it is simple, but when you approach it from an operation standpoint as too simple, I think you negate the requirements that enable you to be successful. Does that make sense?
Joe: Yeah, they’re looking at the wrong things.
Joe: They’re not looking at the most important thing, which is the relationship. With wholesale accounts, with wholesale clients, you’ve had friends; I mean, you’re in the circles, people that you work with. How many wholesale brand relationships do they have or have to have; sorry, I know this is an unanswerable question with accuracy, in order to really make a good living out of it?
Dillon: Sure. If you want to replace a job, the way I source, and the criteria I look for purchasing inventory, which is not super complex by any stretch of the imagination, 10 to 12 SKUs is pretty solid. I think you can get to a point where you’re actually replacing job income and at least paying the bills. The cool thing about; so you have the spectrum, right, where private label is going to have like a handful; like a small amount of SKUs, in my opinion. One to two, obviously, you’re trying to grow that over time, but if you look at the average it’s probably a little bit less. Then on the other end of that spectrum, you have like retail and online arbitrage where it’s like thousands upon thousands of SKUs. Wholesale is kind of somewhere in the middle, but leaning more towards the private label route. So a handful of great relationships is enough. You don’t need to have 30 plus relationships. I think that’s where you get really, really big but you don’t really need that. You could do a quarter million in revenue with six to seven SKUs if they’re the right kind of SKUs because it is repeatable and scalable.
Joe: And what are your margins on that? What’s left over for you at the end of the day, if you’re doing a quarter million in revenue? Because if it’s a private label, that’s kind of doing a quarter million in revenue, there’s not a lot left over. I guess maybe upwards of 50,000 maybe. But they’re taking that money and they’re putting it right back in inventory so there’s not a lot of cash flow in that situation.
Dillon: Yeah, it can vary. I’ve seen people have some pretty high margins. I’ve seen people take really, really slim margins. I look for at least 30% in gross margin. Obviously, the business expenses that’s kind of going to be situational. But if I could do 30% outside of the business expenses, that’s pretty good in my opinion. I think it’s scalable.
Joe: This is after Amazon fees.
Dillon: That’s correct.
Joe: Okay, that’s pretty good. That’s pretty solid, actually. What about exclusivity? At what point do you get to be exclusive? Because in my view, that’s going to make the business more sellable and have value. So, you’re not only building cash flow but you’re also building equity. Obviously you got to do better than everybody else and be really important to that relationship. Is that it?
Dillon: For the most part, yeah. What’s funny is it is that relationship and it’s understanding that it just takes time; like any great relationship, it just takes time. So a lot of sellers jump in and say, hey, I just got this account, how do I get exclusive? You wait. You do a great job, you become their biggest buyer, you work with them, you add more value than just your money, and then you start to have that conversation over time. I had a friend, she started her Amazon business, it was doing well, and she followed up every two weeks for a year just to get an account. And not just like, hey, how’s everything going? These are in-depth emails of, hey, I noticed this on your listing here’s what I would recommend you do and gave them all of that knowledge. And eventually they let you know that that’s a lot of work, what would it take for you to do that for us? Give me the account and I want exclusive rights. They go, you know what, let’s test it for two weeks and if it if it pans out, we’ll absolutely give you the exclusive rights. And she’s got it now.
Joe: Excellent. Yeah, I know that’s the trick. Just again, help them. It is a ton of work so give it all the way and then they realize I really do understand the value of having you do it for me. Let’s talk about competing on Amazon for the buy box and what Aura Repricing does because it’s so very different than what most people have heard on this podcast because most people are content owners, SaaS owners, private label brand owners. They’re not wholesale.
Dillon: Yeah, so roughly 82% of organic sales come via the buy box. So that buy box is just that where you go as a consumer and hit one click purchase. That’s what we call the buy box. When you’re competing with other sellers on the same listing, you’re not trying to optimize your listing to beat the other listings. That goes out the door. Now, it’s about value. In terms of your price it obviously comes down to your competitive advantage in terms of getting cost lower from your supplier hence relationships matter. It comes down to seller feedback a lot of the times. So what we’re having to do is stay competitively priced 24/7. And by the way, these things are changing every few seconds. Private label, you’re used to set the price and maybe every now and then we’ll change it.
Dillon: No, 24/7 here and so some of our larger users that have a few hundred thousand SKUs that are actively repricing, we’re doing tens of thousands of price changes per second just for them. So, what we’re having to do is say you can’t do it yourself, it doesn’t scale so let’s hand that over to a computer with an algorithm with a set of rules that can say, you know what, the price just changed let’s react to that as quickly as possible. And if doing so, we increased the amount of time you’re in the buy box, which increases the amount of sales you get.
Joe: What happens if you’ve got three products in the buy box, they’re all the same brand, and two out of the three are using Aura Repricing?
Dillon: Yes, we get this question a lot; what if everybody’s using Aura at the same time? At that point, it comes down to two major things. One, your strategy because you have some control over that. Some people are willing to be more aggressive than others. And then number two, what’s really more important, in my opinion, is your cost. A lot of sellers make the assumption that we got the same costs. I know what I paid for so therefore, I theoretically know what you paid for it. That’s not true. I could have lower cost because I have a better relationship or I have more capital to play with. So, I’m purchasing in larger quantities, in which case I’m getting quantity breaks on my cost, in which case I can be more aggressive in my price. So, it comes down to those major two things.
Joe: Okay, what else can people that are a wholesaler do to improve their rankings, listings, and so on and so forth on Amazon?
Dillon: Yeah, one of the things we’ve seen; forecasting with wholesale is very important, just like it is with private label. However, it’s a little bit different. So, if I’m not mistaken, a lot of private label people are purchasing like three months’ worth of inventory because you have a lead-time for manufacturing. For us, it’s like every two to four weeks we’re placing restock orders. So, we’re trying to get dense from when the capital goes out of the business to when it comes back with profits as small as possible.
Joe: So, it’s two to four weeks if you just average to three I mean that’s a quarter of the working capital that you need for a private label business.
Dillon: 100%. So, we’re looking at stuff like that. What’s important there was a lot of forecasting won’t factor in regional distribution. And what I mean by that is a lot of times you can take a SKU that you’re selling on and you have repeat sales and let’s say you’re moving a hundred units per month like clockwork. You testing increasing that to 200 can actually have a larger distribution in terms of where your SKUs are in the country and now you’re starting to get access to what’s called a regional buy box and you actually start to see a little bit more sales from that. I didn’t believe it at first and then I tested it with a few selling friends, and sure enough, they increased sales by just doing that. So you don’t have just the one global buy box, although that’s what we’re able to focus on as developers. You also have a regional buy box.
Joe: And Aura Repricing can have an impact on that?
Dillon: That’s correct. That comes basically down to where is your inventory today, like right now.
Joe: And how do you control that again with Amazon?
Dillon: Increased inventory.
Joe: Just spend more money and have more inventory and then you’re going to…
Dillon: Yeah, it’s a test for sure.
Joe: And you can do that over time, obviously, if you have personal overhead.
Joe: Okay, tell me about Aura Repricing and when did you launch it? To me, honestly, the development of this must have been crazy. I mean, you did finance and M&A; is your business partner a coder or a developer?
Dillon: Yeah, so me and my co-founder, James, met actually via Instagram. So, we were both wholesale sellers, separate of each other and we just started to meet up once a week via Skype back in the day and just, hey, what’s going on? What’s new? He was kind of helping me scale my business because his was already at seven. Mine was at six figures so he was helping me understand some cash flow stuff that I needed to learn. And eventually he was like, hey, by the way, I’m at UMass and I am an engineering student. I’m already starting to work on some side projects. Do you want to partner up? And that’s when we started to launch Vendrive. So, Aura, the beta took roughly eight to nine months of him by himself, because I’m not an engineer. I’m not a coder. I can script some stuff and that’s about it.
Dillon: So that was him pretty much working 80, 90 hour weeks for eight to nine months, just grinding it out and we got the beta up. We tested with 20 to 30 users just from day one just to get that feedback loop going. Launched my winter break between semesters in December of 2018 and then we launched that and I had 50 users paying and we just started a feedback loop and scaling from there.
Joe: And you both finished college?
Dillon: We did. Yeah, we both finished college at the same time and now we’re actually; we were fully remote. I was in Florida, now we’re in Boston and we have our first like large office which you can see back here. We have the walls painted and the whiteboard is up, and we’re actually hiring three engineers in the next month or two.
Joe: Very cool. That’s a great success story, man.
Dillon: Yeah, thanks.
Joe: I know that you said he was in college and you were in college at same time but developing it in college; doing seven figures in revenue while in college is pretty impressive. So let’s say he’s doing a million, he’s doing maybe 300,000 in cash flow, in profit, even if you divide by two while a student in college, that’s pretty damn impressive.
Dillon: It’s not bad. Yeah, it’s definitely not bad. That’s the thing about wholesale is I tell people, it can be at whatever scale you want. I think it’s difficult to really take a private label brand and just be like, oh, I just kind of want to make a little extra cash. When I started mine again, I went back to school, and I was like if this thing just pay my bills and allows me to focus on school full time and get through that and not take six years to get through, it’s kind of a solid win. And to be honest, that’s kind of where I got it and I was happy with that. And then once I graduated, it’s like cool now, we can go full force. And really I did like two semesters before because Aura started to really scale and outpace itself, which was awesome. But yeah, I think it’s cool thing.
Joe: Let’s get back to the repricing part, because if I’m the wholesale owner, how am I going to work with Aura and Aura Repricing to determine how low it goes? Is this simply a matter of math and numbers and what my relationship is; how does it work?
Dillon: So you have two major ways of setting a min max. We always require a minimum and a maximum price. This is the range of which Aura is allowed to play within because we don’t want to go too low and not too high and all that good stuff. You can manually set that. Some people have their own formulas, some people just take current buy box price and reduce that by 30%. What I typically recommend is the second option, which is an automated option. So, you can set that based on an ROI. We’ll actually import your cost that you give us or you’re using a tool like Inventory Lab to store that. So, we’ll import those and you’ll say a minimum I want 20% ROI. What we’ll do is we’ll factor in your cost and then the Amazon fees, obviously factoring in that 20% ROI and say, okay, here’s your calculated min price. We’ll automatically set that for all your SKUs. So we create different strategies and those strategies can be assigned to a group of SKUs, one SKU, your entire account; it’s really up to you. And then however you want to set those min max prices, you can definitely do that.
Joe: That’s pretty impressive.
Joe: When it comes to wholesale, again, I’m a little ignorant on it, because it’s probably a well-known brand; I would assume or a well enough known brand are people searching for the brand name and therefore there’s not as much sponsored ads or are people doing sponsored advertising as well?
Dillon: This is what’s interesting, I know ads are very prominent and expensive for private label. What’s interesting is when I started testing paid ads on wholesale, they were actually very cheap. And for whatever reason, the brands themselves do not seem to be doing that on Amazon. They don’t. They just let the sales happen and they don’t progress with it, period. The opportunity is that it’s less competitive because from my personal experience, what I’ve done is I’ve created ads targeting the brand name and the product name and not the type of product. So the proverbial garlic fresh, right.
Joe: [Inaudible 00:22:36.5].
Dillon: Yeah, but we’re going to do as an example, Nike, blah, blah, blah. When you’re doing that they’re super cheap and very scalable. I had a product that retailed for $329.95, it was costing me an additional $5 per sale via paid ads, and they’re already doing 30 to 40 units per month organically. But that netted me $55 net profit so minus the $5 we’re still doing 50 bucks. So I’m able to increase my volume. I’m trading five bucks for 50 bucks at this point.
Dillon: [inaudible 00:23:11.3] oh, that’s expensive, five bucks. I’m like, not really when you do the math on it.
Joe: Absolutely, you’re paying five bucks and you’re getting 50 bucks back. That’s a good return.
Dillon: Yeah, I’m not even very good at it. That’s the important part.
Joe: Are you doing any video ads; do you have the options to do whatever you want or can you not do video ads for wholesale?
Dillon: I’ve yet to see any restrictions on that. I haven’t done the video ads. There’s this weird dichotomy where there’s some things you should be willing to do for your brands and then there are some things that are just going to cost too much. It’s very ROI driven. So, some brands are going to do that themselves and that’s going to help you organically. Some sellers, if you have the right exclusive agreement, it can make sense. It just comes down to the math where it really will…
Joe: We just had Judson Morgan on from www.Butter.la and he talked everybody through how to do videos from your iPhone or a Pixel, and it’s not a lot of dough. An unboxing, if you will. You’re making it natural and normal and he talked about the lighting and all that stuff. That’s what I’m talking about. He talked about the bump in conversion rate with videos, either video ads or videos in your listings. I know that with private label, they get six or seven; maybe six to eight images that they’re allowed to have and one of them can be video. Normally it’s pushed to the very end. Do you do that with wholesale as well, the video, the unboxing, and things of that nature?
Dillon: You do to a certain degree. So, part of the value add to the brand, again, is not just your capital. It’s looking at where the listing itself can be optimized. A lot of sellers are hesitant to do that stuff because all that work is not just coming back to you. It’s coming back to all the other sellers. And so that’s where it gets kind of interesting, where there’s some growth hacks, so to speak, that are only going to come back to you as the seller. So you’re not really increasing competition’s volume as well. I’m of the opinion if it raises all boats, I’m still probably willing to do it because I’m still getting a positive ROI on that it just depends on the person. So, I’m a huge fan of a growth strategy that I kind of created actually from Amazon affiliate sites. So, I was looking at different brokers. I’m just looking at what’s for sale in the Amazon space. I’d like to keep a look at multiples and what’s being sold. I was like, you know what, these Amazon affiliate sites are genius. They’re there to make money and move inventory because that’s when they get paid. So then I said, well, what happens when I start to reach out to these site owners and say, you know what, I sell a grill thermometer, you have a bestbarbecue.com Amazon affiliate site, what happens when I get you to replace your $200 grill thermometer with my $329 one, does that actually increase sales? And if we can structure the URL correctly, all of the sales are coming straight to me, not just anybody who happens to be in the buy box at the moment. It turns out you can. So, there’s some more strategy there in terms of growth but that’s where you have to really think through the relationship you have. If it’s a very short term seasonal relationship, I may not be willing to go to that extent because it is a lot of work. However, if it’s a brand that I want to work with for a long period of time, that’s different. And I’ve always told people to approach it that way. If I don’t in my mind think that I can work with a brand for the next 12 plus months, I really don’t see the point in it. I’m not opportunistic in the way I approach wholesale.
Joe: You’re blowing my mind that you’re 28 years old, I got to tell you that.
Dillon: I appreciate it. Thank you.
Joe: All right. So, Aura Repricing, anybody that does any wholesale got to go to Aura Repricing. Check it out and see what Aura repricing could do for them. Let’s talk also about the two podcasts; I think you’ve got two podcasts or is it one? Anything else you want people to know about you and things of that nature before we wrap it up here?
Dillon: Sure. So, I kind of got sick of the $3,000 courses. I’m not anti-course by any stretch of the imagination.
Joe: We just launched one for $3,000.
Dillon: So, I decided I was going to share everything that I knew, which is I’m not an expert in my opinion, but I know some stuff and so I’m willing to share everything that I do know. So if you go to www.Vendrive.com/blog, I’ve pretty much written some crazy in-depth articles on wholesale in terms of overcoming objections with suppliers, the cash flow management of it; all the fun nitty-gritty stuff. And of course, Wholesale Made Easy, which is the podcast. I’m not running that active anymore. That was structured to be like an evergreen podcast where it’s not short-term tactics. It’s foundational stuff like we’re talking about here that if you listen to it a year from now, it’s still going to apply. We do have the new podcast called Welcome to Growth, which is me and my co-host, Jonathan. It’s way more casual and it’s more just me and him going back and forth every Thursday on different topics.
Joe: That’s where I heard your first. I’m like I like these guys, they don’t have any scripts at all. It’s perfect for me.
Dillon: We literally show up that morning. We might text the night before and say, hey, here’s three topics that I would like to talk about. We’ll pick one and just riff on it for about an hour.
Joe: Yeah, it’s awesome and you’re a wealth of knowledge. We need to talk more about wholesale again someday. Thanks for coming on the podcast. I appreciate it.
Dillon: Yeah, thanks for having me.