Income Report:   September 2019

Let’s dive into the numbers behind my print on demand profits for the month of September. This month I drove my first sales on Shopify (!) and saw the effects of Etsy Ads come to bear on my Etsy store.

Premium Brand – Etsy

Orders: 38

Revenue: $3,780

AOV: $99

COGS: $1,075

Platform Expenses: $1,207

Gross Profit: $1,498

Gross Margin: 40%

Etsy has changed their statistics view, so you’ll be getting a different look from here on out.

Revenue and profit were down significantly month over month, which I attribute to the Etsy Ads platform taking effect (lower conversion rate on paid traffic) and increased competition in my niche.

 

 My marketing on Etsy has historically been 100% driven by on-platform paid advertisements. I don’t have a strong social presence, and customers generally don’t associate my brand as one they can easily locate & shop at outside of Etsy.

That’s why the changes to Etsy’s ad platform had an outsized impact on my business…I’m not diversified enough! Here’s a full look at the damage:

Ad Spend: $973 🔺 10% MoM

Revenue: $1,545 🔻 $2,192 MoM

ACoS: 63% 🔺 37% MoM

CPC: $0.51 🔺 $0.27 MoM

CTR: 1.2% 🔻 0.3% MoM

This data confirms what I had suspected to be true when Etsy announced the Etsy Ads platform. Cost of customer acquisition is up, conversion rates are down, and return on ad spend is weaker than ever. My belief is that this is primarily due to a lack of product-market fit with Google Shopping and the typical Etsy customer, compounded by the fact that we no longer are able to control cost per click.

 

Premium Brand – Shopify

Orders: 2

Revenue: $246

AOV: $123

COGS: $42

Platform Expenses: $37

Gross Profit: $167

Gross Margin: 68%

 

Getting my first Shopify sale was really exciting. I realize the value of diversifying your ecommecre business across channels, and had to do quite a bit of setup to drive customers to my own personal website.

These customers in particular were attracted with steeper than usual discounts, so there’s definitely more work to do to drive full price conversions, but the proof of concept is there.

I’ve realized that I don’t enjoy doing the groundwork of marketing and brand-building as much as I do optimizing paid advertising campaigns, so I’ll likely be hiring out some help and trying to automate the outreach going forward.

Random Items – Etsy

Orders: 7

Revenue: $168

AOV: $24

COGS: $107

Platform Expenses: $19

Gross Profit: $42

Gross Margin: 25%

This little store will be here when I need it for launching & testing new items, and it’s still worth keeping around!

 

Expenses

Photoshop: $11

Virtual Assistant: $100

It’s been a huge help to have my VA back in the mix, helping to do more of the back-end customization work. We’ve set up a Trello kanban board and it’s working out really nicely to have custom work turned around in 48 hours. The work gets done right because I trained him thoroughly, and we have an open dialogue where he can ask questions openly and we both commit to improving the process over time.

September Pre-Tax Profit: $1,596

Gross Profit: 38%

This is one of the lower profit months I’ve had in a while, but fortunately the main cause (Etsy Ads) has been identified, and I’m taking steps to mitigate the pain. Now that I have some help back on-board, I can focus on shoring up a basic marketing automation and making sure I have enough new products to entice buyers in Q4.

 

What’s Up Next?

I’m working on my own store(s) to get ready for Q4, so the in-depth product reviews will slow down for a bit.

I’d love to hear thoughts, feedback, and suggestions from you anytime!

Best,

Spencer

Full Transcript

We’ll talk mostly about Etsy and we’ll also talk a little bit about how I got my first two sales on Shopify, which was super cool. Follow me along to merchlifestyle.com where I’ve got a blog post written up with all the numbers and we’ll go right through it.

The first thing to start off with is my premium brand, which I sell primarily on Etsy, but also now through Shopify. This was an interesting month of the start of a decline in traffic that I need to figure out how to solve. If you can see here, my visits in the beginning of the month started out strong, but if we remember, Etsy ads started to take effect for most people in the first half of September.

If you’ve seen my other video on that, you know, that I’ve recently decreased my budget because I have a lot of concerns about the return on investment that people are getting on that platform. And as you can see, most of my traffic has been traditionally driven by paid advertising, which is a weakness in my business I’m trying to work on.

But you can start to see the effects of that as visits start to trail off. And we had a pretty abysmal conversion rate of less than a percent. Off of those visits on revenue of just shy of $4,000 so what continued to be good in September was the average order value is almost a hundred dollars.

So I’m finding success in getting people to convert on just a higher dollar value bundled type listings, which is great and not not super easy to do, but my gross margin was 40% and I think there’s definitely some space to improve on that, I think gross margin, typically what I’m targeting is 50% plus.

And if you can get there on a, on a physical products business, with with all your expenses included to calculate that margin, then I think you’re doing a pretty good job. So we have a little bit of work to do on the gross margin, however, I think when we look at our advertising stats, you’ll see, you’ll see why that margin dropped a little bit this month.

And I think it’s related to Etsy ads. Also in this blog post, you’re going to see a little bit of a different view. Etsy is changing their statistics platform, so same data, but just a different look. You can see here our revenue view for me, since the order value is a little bit higher, my sales tend to be a bit more lumpy, if you will, where you might have a couple of zero days and then a couple of larger days as well.

Ah, so you can see it had a couple of days close to $300 in revenue. Those are always good, but overall, the revenue was still lower than in the in our last month, so got to figure out what’s going on there and how we can continue to drive revenue cost-effectively. We’re going to dig into a couple more statistics on Etsy ads so you can see a little bit about how that effected the month of September for me, my stats from for the whole month.

I’m really not a great return on my advertising spend. They’re $973 spent versus only about $1,550 in revenue. So that’s an advertising cost of sales of 63 percent, which is really awful. Traditionally, my ACOS has been closer to 10 to 15%. Oh, and that number is higher. That means I’m spending more money to take in the same amount of revenue than I used to be, which is probably part of the reason why my gross margin took a hit this month.

If we walk through just some of the key statistics, my ad spend was up 10% but my revenue was down. This is a great stat actually. So my ad spend went up 10% so about a hundred bucks last month, but my revenue on that spend went down $2,200 so the only thing that’s really substantively changed since then is that these conversion to the Etsy ads platform, which if you don’t know, they bundled in Google shopping with promoted listings and removed your ability to set the cost per click, resulting in what I see and what I think the data has shown to be a more irresponsible and a more difficult platform to drive, to drive good returns. In addition to my average cost advertising, cost of sales spiking, my cost per click went up by 27 cents, which may not sound by a lot, may not sound like a huge increase.

However, that was over 50% on the net and then my click through rate, that was also down slightly. So what that tells me is on my ads that are getting views that are getting impressions, less, people are clicking through the people who are clicking through, I’m getting charged more money and I’m making less money off of those clicks.

My conversion rate is essentially down. Oh. I think a lot of that is attributed to the views, you can start to see as I reduce my budget. I really, I didn’t reduce it fast enough. I’ve used start to trail down towards the end of September, really with no appreciable difference in the amount of products I have up or the keywords I’m targeting.

Some of that may be, and I do think a little bit of that is competition, however, that the huge differences that I’m seeing an ad spend has to be related to the changes in Etsy ads. I don’t see any way around that. Now that’s kind of some dire news and I have a little bit of work to do to go figure out which keywords to target differently, or maybe I need to segment my listings, position myself in a different way on Etsy.

However we can talk about a bright side. Oh, the premium brand too, which is that I was able to drive a couple of sales on Shopify. Which was excellent. So over there about $246 in revenue. So I made two sales and my platform expenses on Shopify, they want to charge you 29 bucks a month and then there’s some payment processing expense that you pay on most online platforms to take credit cards.

My gross profit on there was $167 with a gross margin of 68% which is awesome. And those are customers that also sign up for my email list, to which I’m able to remarket to them and they’ll understand a little bit more about what their preferences are and try to engage with them over time, which is way, way more valuable than relying on a customer that just goes on a platform like Etsy or Amazon, and they’re just looking for the product. They don’t care about the store of the brand, the experience behind it. They just want something fast. They want it now, and they want the cheapest version or the best value version. And that’s something where an email list and segmenting premium brand, you can help protect higher margins.

You can you can get better customer feedback with customers that are more engaged with your brand and are willing to give that to you overall, that was the direction I wanted to take when I sold my Merch by Amazon business. It’s the direction I’ve delayed on too far, I think because Etsy has been growing and growing until that was fair, we’re really figuring out profitable advertising and that was running really well until they decided to gotcha to Google shopping and really, really impact the program negatively. So it’s, it’s back to me to figure out how to grow that traffic outside of Etsy. And e-commerce is always this game of, I was trying to stay ahead of not only your competitors, but there’s a lot of gatekeepers that are always trying to take a bigger and bigger slice of the pie. So getting a little bit of a win on Shopify and finding customers to go right to your store, convincing them to check out through your process.

So I want to definitely continue to run the Shopify store and definitely need to build some more marketing process. And it put some more resources around. Yeah. Growing that funnel. But you can do it but. Again, I recommend that in my Etsy versus Shopify video, I recommend that if you’re under a thousand dollars a month, I think Etsy is still a good place to go to test out your concept, and then once you grow beyond that, you can start to think about your own e-commerce property on the side where you can maybe funnel some of that traffic through either your marketing expertise or or other means.

I think, look for more investment in marketing and trying to grow that channel from me, but have, I’ve proven it can work a little bit. And the margins on those orders were, were bigger than what I was able to achieve on Etsy, primarily because I’m not paying for any ads on my own platform.

When it’s my website, I put whatever product that I want in whatever configuration, in front of buyers, against whatever rules I want to have. I don’t have to abide by Etsy and other platforms ever changing guidelines, which is, which is really great. You can, you can really make tailor that store to match your customer, and you’re not limited by the restrictions of a platform.

And you can do that fairly easily with something like Shopify, you can do WooCommerce WordPress. There’s many, many ways you can set up a store and just leverage someone who’s already figured out how to make the back end of a, of a store and checkout flow work for you and you just leverage that.

The real key where you need to differentiate yourself, particularly in a more and more crowded e-commerce and particularly print on demand environment, is to figure out how to do marketing and to differentiate yourself. Because if everyone’s everyone’s going through Printful and Teelaunch, you name your supplier, then the variation of supplies and products will continue to get consolidated in your market will get more and more crowded. I’m certainly seeing that in my niche. So my challenge is how do I continue to stand out and, and a good way to do that is to just reach more folks with your message and your brand, which is something you can funnel them to Shopify and not have to pay for Etsy ads, which is the goal.

Let’s talk a little bit about some other, a little bit of other revenues, some expenses, and we’ll wrap random items store on Etsy. It made 42 bucks in profit. I’m not going to shut it down. It’s there. It’s got five stars on it. I’ll probably completely change it when I find another niche that I want to experiment with.

If it doesn’t really align with my premium brand right now, so we’re going to let it ride, and then I was able to keep my expenses really low this month. Photoshop, 11 bucks and One change that I’d been talking a little bit about is getting my virtual assistant back on board. It’s been a huge help to have him back in the mix.

I didn’t have a lot of work for him, rather, I didn’t set up my process to give him a lot of work until I really realized that I wanted to stop doing a lot of the customization and order management work on myself, and I wanted to focus more on marketing and content for you guys, so it’s been a really big help to have him back in the mix.

We manage our workflow with a cool free software called Trello. You basically configure a task. And you can put a bunch of checklists on there and there’s ways you can link files. It’s great. Yeah, so what I’ll do is I’ll put a, when a customer has an order on Etsy that I need a little bit of help on, I will quickly fill out a card and I’ll put that in the Trello board. He will take a look at it and do the work necessary. Then when he’s done, he updates that card and that lets me know where to go from there. I’ll finish the configuring of the order and then that way I don’t have to play any games about giving anyone access to my Etsy account.

I know a couple of people have had trouble with that recently where you get your VA in and you’ve got multiple people logging onto your Etsy account and you do want to call out people in your shop. And you want to make sure you know, those people are, are, are listed. Anyone who’s helping with you, with your work.

And I have that in my own store. However, it’s not a great, great move. Not a great look to give people access to your, your Etsy store. I think you really want to manage those two things with a single point of contact. How so? Look for more from me on virtual assistants and outsourcing for me.

I don’t want to spend another Q4 drowning in orders. I’d rather be that providing great customer service and making sure we can fulfill in a timely manner. So to make a long story short, September, pretax profit, $1,596, which is fine. The, the overall gross profit when you include those expenses is less than 40%.

And I really think that’s due to spending on Etsy ads, I really didn’t adjust my budget down as fast as I should have. And that’s because I wanted to collect data on it. And the data is telling me it’s, time to get out. So since then, you’ll see in my October income report, I dropped my budget down significantly and we returned to what I would call a more responsible return on investment on the on platform advertising.

All right, so what’s next for us? We are in the middle of Q4. I’m recording this after September is, you know, so I’m working on my own store. I’m trying to get ready for the flow and outsourcing has been part of that and trying to get a couple of new listings up to make sure I take advantage of the increase in traffic.

If you’re in e-commerce and you’re in print on demand, can be a great time, but it can also be a time of plenty of work. So with that, I’d love to hear your thoughts. Please drop me a comment, or let me know what you’d like to hear about next shortly. You’ll see my income report for October and we’ll keep rolling from here.

Well, thanks for watching. Thanks for listening and catch you guys later.

 

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