That time I built and sold an e-commerce company in my freetime
John J. Schaub
Jan 19, 2023
The bulk of my career has been in Fintech but along the way I have taken a few diversions into other sectors. This post will be about one of the more interesting diversions where I founded, grew and eventually sold an e-commerce company in my freetime. I get asked about this little sidegig a fair bit and it contains some really useful lessons about building a business and general Product Management so I thought I would share it here. The story starts with the fact that I collect gaming books and ephemera from the 1970's and 80's. If you have ever collected anything you will understand that you will end up with huge numbers of duplicates of more common items, so a big part of the collecting process becomes figuring out how to get rid of the things you do not want to avoid filling your spare bedroom with stuff. Really there is a fine line between collecting and hoarding and this purging process is that line.
To accomplish this purge I started listing things on Amazon and overtime that grew to about one sale a week which was still not really sufficient to keep things under control. At about this time a Canadian company called Shopify was hitting the news with their platform that allowed small businesses to setup e-commerce websites quite easily. I was interested in Shopify as an investment and as a Product person I always want to try out the Product so I spent a Sunday and built a simple ecommerce site - LibrisArcana.com. My thinking was this would let me test out Shopify and also learn a little bit more about Social Media marketing which was something I really had no background in at the time. So I setup the site and some social media profiles then listed a bunch of books. As an aside within a few days of using it I decided Shopify was an awesome Product and invested in them as well which turned out to be a pretty smart move. It turned out that I had a knack for social media marketing and quite quickly I had the site up to one sale a day. This was a totally comfortable pace as a thing to do while watching TV in the evenings so all was good but I now had the opposite problem in that I could not get inventory of books fast enough.
Having accomplished my goal of selling out the backlog I could have wound things down and walked away but instead I saw this as an opportunity to try to actually create a physical product. All of my career to that point had been selling software and services and I had never actually designed and built something physical so I decided to see what I could do about building an actual product and selling it. The site had been reasonably profitable to that point so I had a few thousand in play money to invest but I really did not want to risk any money on what might be a flop so I did what a lot of small product companies do and launched a Kickstarter. If you do not know Kickstarter allows you to collect orders before actually producing your product and is a brilliant way to de-risk a launch. The product I had hit on was a leather book cover that could be put on most gaming books which seemed like a pretty reasonable move from the books I had been selling. I scoured Alibaba and found a manufacturer in China who could build the book covers and created the Kickstarter campaign. It was not a massive success like some kickstarters but we sold over 20k in book covers which was more than enough to cover the cost of manufacturing with a solid profit left over. So I spent the next couple of weekends figuring out customs (do not get me started on how backwards that system is) and packing all the orders. The business was continuing to be profitable and had a steady trickle of orders but it was not really growing so I sat down and did some brain storming.
The basic question infront of me was what do gamers love and what would I love as a business model. The answer was dice (gamers have a weird obsession with dice) and recuring revenue (who doesn't love that) which meant a subscription model. So I glued the two ideas together and launched a dice subscription. To be clear I did not think it was going to work and I am still a little baffled that it did but a good Product Managers runs potentially interesting experiments even if they are not confident in the outcome. The great part about running a tiny little side business is you can iterate crazy fast and less than 30 minutes after coming up with the idea of a dice subscription I had figured out how to do recuring billing and launched the product on the businesses Twitter profile which was now up to around 1,500 followers. Twenty minutes later my phone gave that positively addictive Shopify ka-ching cash register sound and I had my first sign up. Protip if you are ever designing an app try to create the same sort of intermittent positive reinforcement Shopify did with that sound, it was brilliant. Keep in mind I spent zero dollars launching this product, I had no packaging, no inventory and no plan to actually sell anything it was a pure experiment. I did have a few sets of my own dice though so off I went to Staples (An office supply store) to find something to ship them in. While at Staples my phone did the ka-ching thing again and I had my second sign up. So with some plain brown packing envelopes in hand I went home to pack some orders a little surprised that the experiment was going so well.
The next couple of weeks was definitely more work than I was bargaining for as I hustled to find suppliers and figure out the positively Byzantian world of international shipping. I did a couple of smart things early on the first was just chatting with the local post office owner who gave me some invaluable advice including the fact that it is vastly cheaper to ship things that are less than 20mm thick. By spending my time getting my packaging just a hair thinner I was able to boost my profit margin significantly. The second smart thing was to bypass the Alibaba suppliers and go direct to the factory owners to get better pricing and more interesting designs. Working directly with the factories was honestly pretty easy and I found them to be honest and super helpful but there were issues.
To boost the number of subscribers to the point where I could start having custom runs of dice made I went back to the Kickstarter well and ran a pretty successful Kickstarter for two sets of dice. To get to this point I had to reinvest almost all the profit the site had made so it was a big step. When the two sets of dice arrived the first was to this day the nicest set of dice I have ever seen and the second was pretty cool but there was a misprint on pretty much every d6 (six sided dice for non geeks). The factory was good about it and manufactured replacement dice but it created a multi week delay in shipping the orders and then it fell to me and my lovely wife to sit and replace a single die every single set. This burned up most of a Saturday and it was clear to me that if the site was going to continue to grow I needed onsite quality control to avoid problems like this going forward. Beyond that I was now at about 600 subscribers which meant packing 20 orders a day everyday or about 30 minutes of work which in addition to customer service and social media was way too much.
Never one to leave well enough alone I continued to grow the business eventually outsourcing the social media to leave myself to deal with any customer service concerns. At this point the site had a lot of subscribers and I had also branched out into digital content and print on demand so even just standard unavoidable shipping issues meant I was handling at least one customer inquiry a day so outsourcing social media was essential. Additionally by this point I had about 15,000 followers on Twitter alone so the social media was considerably more involved than it was in the beginning. There is another factor here as well which is a great lesson for Product Managers and anyone building a business. When I started the company I saw the customers as middle aged geeks like myself and that is exactly what they were initially but by running real experiments I had pivoted the company into selling a product that really did not appeal to me and that I did not really understand. By this point in the companies history the average customer was a 22 year old woman from California who liked matching her dice and nail polish to post photos of the newly acquired dice on Instagram. As an aside this was a common enough occurrence that I put serious thought into starting a dice and matching press-on nail subscription. Suffice to say I was just not the person to be running the Twitter profile and just forget about Instagram.
At this point running the company on my own was just non-viable and beyond that keeping all the dice inventory in the spare bedroom had caused exactly the same problem that this entire business was setup to solve. To put things in perspective imagine receiving 30k USD (wholesale mind you) in dice to a condo in downtown Vancouver, it was a surreal experience and fulfilment had to change. It took some research but I found a company Cerberus Supplies run by an English and a Russian guy who were based in China. They understood the gaming market and could handle everything from design (which I'm honestly not great at) to manufacturing and finally fulfilment. The system we setup was utterly seamless, every month they would have a new custom set of dice created and as orders came in they would package and ship them direct to the customers. Things were under control, the site was growing really well and I was under my target of four hours of work a week on what was of course a side hustle. Really my job at that point was managing social media and dealing with the inevitable lost and damaged orders which is somewhere between 1-2% of orders no matter what you do.
December 2019 was a period of rapid growth and by Feb 2020 I was having serious thoughts along the lines of do I just quit my job (which was a really good job) and do this fulltime because the company profits were greater than my salary but then COVID HIT. I suspect COVID is an inflection point in the history of pretty much every company and it absolutely was in mine. The thing to understand is that the majority of my new customer acquisition came from people showing off their new and cool dice to their friends at the weekly gaming session (I was clever enough to provide discount codes for new sign ups in every order to facilitate this). With COVID circulating people were no longer socializing and people were obviously cutting down on discretionary spending and I cannot imagine a more discretionary item then a dice subscription. Add to this a lot of companies had seen the success we had been having and we were suddenly dealing with all sorts of competition.
To be frank at this point I could have easily walked away, the site had been profitable since week one and I had learned everything I had set out to so it would have been easy to declare victory and quit. But the thing is I was locked down at home during COVID like everyone else so I really had nothing else to do in the evenings so brainstorming with the guys at Cerberus about how to make things work was a welcome distraction. On top of that while we were not a massive employer or anything we did have a number of outsourcers for whom Libris was their main source of income so keeping it running was the right thing to do. It was a battle but we managed to arrest the slide in revenue and even launch a new handmade subscription line which put my younger brother who was unemployed due to COVID to work.
Fast forward to 2022 with the world coming out of COVID and things starting to look normalish in the economy I made the decision to sell the company. The decision to sell was not a hard one as I wanted to make some big changes in life and I had learned everything I wanted about physical products and so much more (software is so much easier). I was lucky to find a buyer from the US who had ran other e-commerce companies so they were able to step in and take over with really no trouble at all. The net result was building the company was a fantastic experience and I would highly recomend it to anyone. From a financial perspective on an hour by hour basis it was far more profitable than anything I could have accomplished working for someone else so that was also certainly attractive. As an added bonus because of my experience I got to teach a semester on e-commerce to a class of MBA students one of which is actively looking at launching a press-on nail subscription business so even that crazy idea may come to fruition.
If you are running an e-commerce business and want to chat drop me a line.