eCommerce 101

Hi, 

Above is the honest appraisal of how little I knew about eCommerce businesses when I first started The Hero’s Journal. Today, I want to tell a few stories, and also do a bit of an eCom 101 course for those of you who may not know. 

One of the reasons I started The Hero’s Journal with my Co-Founder (Nick) was I had an interest in data analytics, and I wanted data of my own to sand box. At the beginning of my journey, I spoke with a mentor about data and he said, “Your data is only as good as the questions you are asking.” 

So my goal transitioned to what are the better questions that I need to ask? This is a rabbit hole, but I learned the most valuable lesson of my career thus far: You can only ask deep questions about something when you have the right definitions and the appropriate amount of understanding. 

For example, my question above was, “How do we get more traffic?” To which any seasoned marketer would probably answer, “when you find out let me know.” 

The question isn’t a bad one, but it is too vague to use data to help inform a strategy. A small shift would at least garner a response: “How do I get more warm traffic?” to which the seasoned marketer would ask about the problem we are trying to solve, and how we are going to solve it. That small change would at the very least start the conversation on that specific aspect of the marketing funnel. 

After about 2 years of selling products and doing ~$1mm in revenue, it was time to hire our first agency. Another thing I knew nothing about. We would get on weekly calls with them to talk about performance, and the strategist would spew information at us. They would use terms like CAC, CPC, LTV, UGC, ROAS, etc. 

On the second call like this, after the entire first call I was trying to google the terms as they were talking, I finally asked them to slow down and explain to me the definitions for all these terms… specifically UGC. The air in the room felt like I was an idiot, which would’ve been true, I had no idea what was going on because I couldn’t understand the terms they were using. We ultimately had to step away from working with them because every call ended up being a trivia session where we walked away more confused than anything. 

For you all here, I am going to give you some (of my) definitions: 

• CAC: Customer Acquisition Cost (This is the costs associated with someone becoming your customer) 

• CPA: Cost Per Acquisition (This is costs associated with the behavior you are paying to achieve) 

• CPC: Cost Per Click (Costs associated with someone clicking on the link you want them to)

• UGC: User Generated Content (Someone who is making content that looks like it wasn’t made in a studio)

• ROAS: Return on Ad Spend (Revenue / Ad Spend on one platform)

• Blended ROAS: Blended Return on Ad Spend (Revenue / Ad Spend on all platforms)

• MER: Marketing Efficiency Ratio (Total Revenue / Total Marketing Spend) 

• LTV: Lifetime Value (The total number of dollars a customer will spend on your products during their lifetime as a customer) 

• CVR: Conversion Rate (The percentage of sessions on your website that turn into conversions)

• CRO: Conversion Rate Optimization (efforts to increase your CVR through deepening offer, clarifying product copy, or any other action that makes it more likely for a customer to convert) 

• AOV: Average Order Value (The average money spent on orders)

• COGS: Cost of Good Sold (The amount of money you spend to perform your services) 

There are probably hundreds more, but that is a decent glossary. 

Now, we are going to do some eCommerce Story problems together. 

The Villain's Journal does $100k/ month on 2,000 orders. 

What is their AOV: 

The Villain’s Journal wants to increase their revenue to $120k/month through raising AOV.

What does their AOV need to be if their orders per month remains 2,000: 

Okay last one and it is a doozy (for a 101 course at least)

These are the stats for the Villain’s Journal last month, calculate Blended ROAS, Gross Profit, and AOV:  

$240k revenue

6,000 orders

$10 CPA

$12 shipping per order

$10 COGS

$60k Marketing Spend 

Blended ROAS: 

Gross Profit: 

AOV: 

Why do these story problems? Because this is the basis of how eCommerce pros think about their problems. Each of these metrics is a lever in which if it got a little bit better, they could squeeze a little bit more margin or revenue. 

When you can answer these questions, you are unlocking deeper questions to ask, which will help you start to grow or achieve the business goals you are trying to accomplish. 

This idea doesn’t just apply to building a business, what are the things that you do not understand about where you are trying to go in life? Are there definitions that you do not know? Are there questions that feel silly to ask, but once they are answered, they unlock the real question you need to ask? 

There are always layers. 

Last example, when I was a high school track athlete, I went from a 4:44 miler my sophomore year to a 4:25 miler my junior year. My track coach at the time told me something I will never forget, “As you get closer to 4:00, you will do more work for less time back”

For reference, I ran 90% of the training miles in my life after I ran 4:25 and my best converted mile time ever was 4:18. 

The deeper you go, the more work you will do, and it may feel like you aren’t making progress, but you are getting better. 

Did you like the first chapter of my eCom 101 class? This is the tip of the iceberg. I can keep talking about this if y’all like. 

Until then, 

Kyle