The Consolidation 2.0: Why Ecommerce Is Changing

Listen, price is a terrible differentiating factor. It's the worst differentiating factor there is. You don't want to compete on price, believe me. You don't want to compete on price. You want to compete on other things that allow people to pay a premium, to justify paying a premium working with you rather than going to your competitors.

You're listening to Freedom Fast lane, presented by capitalism.com this is the show about building businesses and investing the profits so that you can live life on your terms. And now, your host, the future owner of the Cleveland Indians, Ryan Daniel Moran.

Hey, boys and girls, Ryan Daniel Moran here. Welcome to Freedom Fastlane, the show about being rich and handsome.

I don't know how to pivot out of that one. Hey, listen, so today we're going to talk about some dreary things going on, but we're going to fix them because I'm noticing some things going on in the physical products world, the branding world, and I'm a little bit surprised by the response of our community, by the response of those of you who sell on Amazon.com, or those of you who sell physical products. Because what we're seeing right now is what I would consider the consolidation 2.0. A few years ago, I warned physical product sellers, specifically Amazon sellers, that they were in. They were on the brink of what I called the consolidation. And the consolidation was when Amazon fully matured and squeezed out a lot of small entrepreneurs. And it absolutely happened because a few years ago, when the amazing selling machine launched for the first time, when people started talking about Amazon and FBA and using it as a way to sell products, the wide open west period was big enough for people to basically white label any product, put it on Amazon, get a few reviews for it and do fairly well for themselves. It was a very unique opportunity, a very unique time in the marketplace. And as a result, a lot of people became millionaires just by selling me too. Products that they listed on Amazon.com, with some good images, with a decent amount of copy and with a few reviews. And what we saw over the next few years was people grasping at those strategies, which they should have been doing. There was a massive gold rush, specifically on Amazon.com and people got really lazy. People got really lazy at what it meant to build real companies. And what we're seeing now is the second consolidation where there is now increased competition in just about every market. Prices are coming down, profit margins are getting squeezed, and we're seeing more sellers flood to the market and make it harder for new entrepreneurs to Carve out a very specific space on Amazon.com and to make sales. So what we have seen is Amazon get a little bit more hawkish about what you can do. They've cut out at least a good number of black hat strategies, thankfully. We talked about how that was overdue here on the podcast about a year and a half ago. And Amazon has finally started to get their stuff together and kick people off for doing things that are a little bit shady. Sometimes they go over the line and they kick people off for doing things perfectly, reasonably as well. But we're seeing Amazon make it a little bit harder for people to cut corners, which is good. We're also seeing them crack down on the previously easy ways to get reviews, which to the end customer is probably a good thing. They're cracking down on your ability to market to their customers, which to us marketers isn't so good. We're also seeing fewer and fewer niche markets with high profit margins, which, depending on who you ask, might be good or not good. Depends on if you got into the market at the right time or not. So this leaves people asking the question, is there still opportunity? Of course there is. Are all the good markets taken? No, they're not. Are there ways to play the game in a way that gives us high profit margins, that carves out a unique space that gives us a lot of sales, that allows us to still dominate and have profitable, scalable, sellable companies? And the answer to that is yes, absolutely. Now we're not done seeing a total consolidation. Private equity groups are still moving into the space. On Amazon.com, you have people like my backroom members buying up certain businesses and doing roll ups and doing the model of owning a space because they've got deep pockets? Yeah, we're seeing that happen more and more. My backroom members are leading that charge. So yours truly is responsible for some of that consolidation. Some of those roll ups that are happening, that provides some opportunities. Because if you are in the position to sell a business, you might be in line for a big payday. And we're seeing a lot of that happen. We're seeing businesses sold for one to $5 million and some big businesses being sold for. As of last week, one of my students got a deal for. Well, he broke the record. We'll just say that when the deal is final, maybe we'll have them on and we'll share more about what the deal looked like. But it's a really, really big deal. A really big deal. So what about the new entrepreneur? The new Entrepreneur looks at the marketplace and says, hmm, getting into these markets is a lot harder than it used to be. Getting reviews is a lot harder than it used to be. Where are my profit margins? And people who never broke through that 100k mark or the 250k mark are starting to say, man, launching products is getting a lot harder. Now, I'm here to tell you that the truth is, it's not getting harder, it's just changing. If you are committed to doing things the way that you've always done them, yes, things are definitely getting harder. You can't put products on. What was that review service that everybody used? I don't even remember. You can't just put free product out there and get reviews anymore because Amazon has made that impossible. You can't just slay your customers with review requests and start to rank higher. You can't just throw any old product on Amazon and expect to rank for keywords anymore. The old way of doing things, the old window is essentially closed. Just coming in and white labeling any old piece of poo is not going to be a profitable business for you unless you come in with a lot of funding and you carve out a marketplace and you decide that you're just going to own that space. And there are people who do that. There's a member of my back room who looks at profitable markets. He goes and reserves a million dollars to crush a space and everyone loses except him. I have a couple backroom members that are that play that game, and there's a lot of money to be had if you're willing to play that long game and you've got the funding to do so. But for most entrepreneurs, that's not the case. So they need to have a more mature approach. They have to come at it a little bit smarter. They have to do it differently than everybody else. So in our time together today, what I'd like to lay out is a few things that you can do to not only survive through this changing landscape and this changing marketplace, but to tell you what's working right now in order to actually do better than you used to be able to do. Why this new period of selling physical products might be more profitable for you if you do this stuff now. Now, just like any change in the marketplace, those who make the changes fastest will see the lion's share of the profits. So if you're listening to this, in the year 2021, this might not be relevant to you anymore, but there's a few opportunities that I'm seeing that I think you could take advantage of. So here's what we could start doing now in order to fix the problems that you might be experiencing when selling physical products in today's ultra competitive landscape. First of all, I believe that the trend is to go super, super micro brand. Here's what I mean. Ten years ago you could just sell protein powder and do pretty well. And if you were to walk the aisles of pretty much any bodybuilding store, you would see protein and mass gainers. And there were a few brands who sold whey protein powder and that was about it. And they had high profit margins and they did really well. But if you go to those same stores today, you'll find protein powder for keto diets, you'll find plant based protein powder, you'll find paleo protein powder, you'll find organic grass fed whey, you'll find pea protein, egg white protein, rice protein, you'll find Incan seed protein, you'll find Omega 3 protein, you'll find protein for every diet, you'll find protein powder for every person, you'll find protein powder for women, protein powder for bodybuilders, protein powder for weight loss. You'll find them for every person, every goal. And all of them make money. All of them could be sold for lots of money. In fact, bone broth protein. The guys behind Ancient Nutrition just raised over $100 million selling bone broth protein, which wasn't even a thing two years ago, but it appealed to a very specific target market. And as a result, they were able to raise a lot of money and they have a huge valuation on their company and they're ridiculously profitable and they've got a huge following of people that love their stuff. Why? Because it's specifically targeted to them. Now, I don't know about you, but even I, as a very successful person, consider $100 million to be successful. And they got it going after a very, very small, rabid fan base. Hey guys, this is Ryan. We're gonna take a quick break and we'll return to the show in a second.

If you've been listening to the last few episodes of the show where we featured entrepreneurs who have crossed the seven figure mark and are on their way to eight figures, then you undoubtedly have heard us talk about the Backroom. The Backroom is a group mentoring program where we cast the vision for getting to $10 million a year and beyond and being ready to sell your company. Because ultimately that's where the big payday is going to come from. We also open up investment opportunities so that you can put your profits into places that give you more wealth and potentially more cash flow or even help you save on taxes. We have some pretty cool places where we put cash that give you sometimes all three. Plus you're in a room with people who are the best in the world at what they do. We bring in my team of advisors that help people get into retail. They help people clean up their systems, they help people clean up their books, they even help them reposition their companies so that they can be sold for more money. We also talk about what's working right now on Amazon and on other channels. But the focus of the group is on casting the vision to get to eight figures and beyond and clearing all bottlenecks that stand in your way while also opening up other opportunities for you to enjoy a life of freedom. Because that's what we're after here. We're not just after this to work hard and work 16 hours a day. We're doing this so that we can have freedom and we get freedom by making enough money so that we can invest into places that allow us to never have to work again and then building empires with people that we love doing business with. And that's what we're doing inside of the back room. And I could also tell you that we're looking to build, buy and buy into some of our students businesses through something else that we're doing pretty cool in the back room. But I will save that for another day because that is still in process. But if you have an idea that you're not sure how to bring to the marketplace, if you've got an audience that you know could be the fertile ground for a really profitable seven figure physical products brand or if you're selling enough product to be able to say, you know, I could step on the gas here if you've got that million in sight, or you're beyond the million and you know that it's time to accelerate the process to get to that eight figure mark. Because you're playing the review game. You're, you're playing price wars. You're tired of sacrificing profit margins. You're working way too long for too little result and you want to clear those bottlenecks so that you can grow faster and have a sellable company. So one day you can have that ideal freedom lifestyle. We can help you inside of the back room. It's one of the more expensive things that we do. It's also the highest ROI thing that we do. So it is application only. You need to be ready for it. And you need to be ready to move when you join. So you can go to freedomfastlane.com, click on backroom and see the application, see all the pricing details from there. Working with me one on one starts at about $100,000. Joining the back room is a little bit less than that. So just know going into it that it's a serious investment and it is only for people who either have funding, have sales, and are ready to go once they join. So if that's you, go over to freedomfastlane.com, click on the back room and you'll see the application and full details there.

Those of you who are new to the game of entrepreneurship might be looking at too big of a market in order to make any money. You might be looking at weight loss or bodybuilding or fitness or running or gardening and looking at mass market products and saying, where is all the opportunity? And the opportunity is selling those exact same products but to a very specific person. Now, that's going to change depending on what market you're going into. But the guys behind Ancient Nutrition, the guys behind the bone broth protein, the guys behind Julian Bakery, the guys who sell products to a very specific audience have proven that going very small can still reap really big profits. So by targeting a very specific group of people, you can do extremely well and charge a much higher price. The example that I often quote on this is the company Onnit. Onnit sells supplements and they sell kettlebells. Now, these are fairly commoditized products, except for the fact that Onnit markets themselves to kind of high end body optimizers, life optimizers, biohackers, and all of their marketing and branding is specifically to that person. So they're able to charge a much higher price, they get a much more loyal customer, and their company is worth tens of millions, if not hundreds of millions of dollars. Not because their products were anything more than tailored to a very specific group of people. Now, they're great products, they do an awesome job, they're better than almost anybody out there. But the real key to their success was that they targeted their customers well and they turned them into very loyal, raving fans because they were different. And that's the next piece that I want to beat into your brain. How are you different? If you're selling iPhone cases, if you're selling running bands, if you're selling any commoditized product, how do you stand out? Right now there has to be some sort of differentiating factor to where Someone says, that's for me, it's not for someone else. That's for me. If they don't say that's for me, they will go to the brand that does speak directly to them. Now, this doesn't necessarily just have to be how your product is different. Can the branding be different? Can the positioning be different? Can the beliefs that you talk about in your social media be different? Is there some way for the customer to say, that's me in what you talk about, in how you represent yourself and what the product does for me? If you do that, you'll carve out a very specific customer base that will talk about you, support you, and pay a higher price. Listen, price is a terrible differentiating factor. It's the worst differentiating factor there is. You don't want to compete on price. Believe me, you don't want to compete on price. You want to compete on other things that allow people to pay a premium, to justify paying a premium working with you rather than going to your competitors. In fact, I would argue that we are primed and ready for what I'd call a reverse consolidation. A reverse consolidation, meaning a trend toward higher price points, higher profit margins. In fact, there's one of you listening right now that could totally dominate your marketplace if you change nothing except you doubled your price and you were the most expensive person in your space. Because some people are looking for the best, other people are running towards the bottom, meaning other competitors are just dropping their price and dropping their profit margins in order to try to compete, go countertrend, be different than everyone else. When everyone else zigs, you zag. And right now that means that you go super targeted towards the person, you raise your price really high, and you position yourself as different than everyone else. That is called a brand, and that is a sellable company that allows you to have high profit margins. That allows you to be ridiculously profitable. And that is something that some of you can do right now, to be different. The way of just looking at big markets and releasing products and giving away a bunch of products for free, that day is over. That window has closed. But if you are willing to play a more mature game, it's easier than ever to do this well and to do this profitably, because the world is still begging for brands that speak directly to them. And more than ever, people are willing to pay a premium for things that they resonate with because we're getting more and more individualized and customized. Here's the best news yet. What this means is that you don't need as many customers as you used to in order to have a million dollar plus business. Because if you are speaking directly to female crossfitters working on their squat form.

That might only be 1% of the market, but that market is looking exactly for your solution, which means they'll pay a higher price and they know all the other women in their crossfit box who are working on their squat. So they start to talk about you. You start to get the bloggers who speak directly about that idea that to talk about you. So getting influencers becomes easier and paying those influencers becomes easier because you can now justify the expense because your profit margins are higher. All of this to say if you are willing to go counter to what everyone else is doing, everyone else is going mass market, everyone else is going low profit margin, Everyone is going the, I think fighting way too hard for way too few spots. The way you win is by going the opposite direction and you carve out a very specific audience and give them exactly what they want and you charge a premium for it. This is the game that I like to play. Now this is not only the case with physical products and it's not only the case with Amazon.com, we could make the same case with information products or even thought leadership. For example, 25 years ago when Robert Kiyosaki released Rich Dad, Poor dad, it was kind of revolutionary. The idea of acquiring assets to become rich was a little bit of a new idea. Nobody had put it that way before. But today, if you were to release almost the same thought pattern without something that was unique, it would fall on deaf ears. The reason is because the brain thrives on newness. The brain discounts anything that it thinks it has seen or heard before, even if it's not applying the knowledge. If it has the knowledge, the brain discards anything that it thinks it knows. Because novelty equals survival. In the brain mechanism, looking for new things means a chance of increased survival and a decreased chance of death. If something is new and strange, our brains tend to either fear it or pursue it. But either way, it doesn't discard it, it pays attention to it. Things that are new get noticed. Things that are old blend in with the crowd and get commoditized. Meaning that their price goes down, their value goes down. We perceive new as valuable. So whatever it is that you are selling, if you can position it as new, you'll do better than trying to sell a me too product. But there has to be a difference. There has to be something unique to it, even if it is Just in the way you communicate with your customers or in the way that you write about something. People have been writing about getting rich for hundreds of years. People like Robert Kiyosaki did it in a different way. And so he got rich. Tim Ferriss did it in a way that was unique for his time, so he got rich. Gary Vaynerchuk talked about it in a way that is unique to his audience. So he got rich. But if you try to do the exact same thing as them, for example, if you start talking about crushing it or working four hours a week, or talk about investing for.

However rich dad promoted investing, if that's all that you do, then you'll be blended in with everybody else who has already talked about this. No one cares if it's not new. No one cares if it's not novel. No one cares if it doesn't give them a new take on something. The way that you win is by being perceived as different. And being different means that you're the only solution to a very specific problem or pain point. And that means that you can charge a higher price. That gives you a small monopoly on a small group of people that know other people just like them. And you don't need very many customers. If your profit margins are high and they talk about you with all of their friends, it makes it easier to target those people. It makes it easier to motivate those people. It makes it easier to understand those people. So you know what products you're going to release to them. But if you are committed to just playing the game that it has always been, you're going to get squeezed out like everybody else is getting squeezed right now. Now this is what we're working on pretty heavily inside of our backroom. This is what I beat into the minds of my students. And when people do this, they see really good results. I'm always surprised though. And I said this on a podcast, it was the private label podcast with Kevin Reiser a couple years ago. I said I'm not surprised by the changes in our marketplace. I'm only changed by the resistance that entrepreneurs have been showing and to those changes. This happens in every market, guys. This happened in search engine optimization seven years ago. People made a killing putting up blog farms and content engines and putting Google Adsense on those pages. And people killed it. They were making cash hand over fist. Guess what? Google put a stop to that, as they should have. This was the case in affiliate marketing and clickbank five years ago. People would put up products with crappy sales pages, get all their buddies to promote it and idiots would get rich. And ClickBank said, hey, this isn't good for our customers. We should do something about this. And now you're seeing it with Amazon and you'll see it in the next wide open west too. You'll see a wide open opportunity, then you'll see things get smarter and harder and you'll see a consolidation of the opportunity seekers out of that and into the next opportunity. It happens every time. It happens in every form of media. It happens wherever there is customers and there is money to be made. When people see a wide open opportunity, they often abuse it. And then the non players get killed out of the marketplace and the buyers and the big fish come in and they buy up the small guys and they make it harder for everybody else to compete. But if you do things in a branded way, if you go after customer acquisition and not just opportunities and you serve people over the long term, there's more opportunity than there has ever been. Amazon is only bigger than it was a few years ago. Customers are only more well off, meaning they're less price sensitive than they were a few years ago. We're seeing products sell deliriously well with as few as 50 reviews. That's never happened before. I've never seen results like that before. I'm seeing profit margins get better in some markets, I'm seeing customer loyalty go up and I'm seeing the ability to target get better. But you have got to focus on those things rather than where the wide open west opportunities are because those have closed. If I'm speaking to you directly, if you're a physical product seller that is starting to feel the squeeze, if you're looking for new opportunities and having a hard time finding them, well, I have a few options for you that you might want to consider. One, if you are doing fairly well and you have a business that you want to sell at some point, I have a mentoring group called the Backroom that will help you get into the multi millions and position to sell. And I do this group because I am looking for more partners and I'm looking for more people to invest in. You can find that@freedomfastlane.com backroom but I'm also putting together a two day event in Austin, Texas in August called the Brand Builder Summit. And the Brand Builder Summit is going to be specifically for physical product sellers. And this is a very content, heavy, relevant event for what's going on in today's marketplace. I originally put this together for my internal students inside the Tribe and my Brand Builder Bootcamp students, and they've already had first come access to tickets to Brand Builder Summit. We haven't released all of the details for the event just yet, but if you want to be on the waiting list or get an early bird notification for when we have all those details, you can find them@brandbuildersummit.com and this will be specifically for physical product sellers who are seeing the changes in the marketplace and they want to be on the winning side of these changes rather than squeezed out like everybody else is starting to experience. So those who implement the changes that are available in the marketplace right now, I believe are in a position to take advantage of opportunities that have never existed before. Guys, we have never seen businesses be acquired for hundreds of millions of dollars or tens of millions of dollars that are just three or five years old. And that's what we're seeing right now. And it's happening more and more. I have never seen big groups and big money move into a space as fast as this has happened. This is kind of like Silicon Valley, but for physical products. I've never seen opportunities like this before, but it's for a very unique group of people. It's for a very small group of entrepreneurs. It's for the ones that are doing their targeting well, playing the game right, and are thinking for the long term. If that's you, I'd like to invite you into the back room or at least come to one of our live events in August in Austin, Texas. I'll have more details for you as we get closer to the event. But for now, I at least want you to be aware of the major changes that are shifting in the marketplace because some people are winning bigger than ever and some people are starting to get squeezed. And if you're getting squeezed, it's fixable, but you have to take advantage of the opportunities that are here now. The listeners of the Freedom Fast Lane podcast have always been kind of ahead of these changes and I would like to continue that. So I'd encourage you to implement these changes in your business now, to stay ahead of the changes that are happening and to run away from the way of business that everybody else in our space seems to be playing. There's just only so many people who can play the low price commoditized game. And it's not a game that I enjoy. It's not a game that a lot of people win and it's not where high profit margins are made. So if cash flow lifestyle and selling your business are important to you, that's how you win in today's ultra competitive marketplace. If you know a physical product seller that is experiencing the squeeze of profit margins, the difficulty of reviews, the consolidation of the marketplace, send them the recording of this podcast. As always, I believe that people who are seeking freedom, opportunity and change are the engine of what makes the world a better place. And that includes you. I'd love to meet you in person, either in the back room or at one of our upcoming events, and I consider it a privilege to be part of your journey. Thanks for being an entrepreneur. Thanks for listening to Freedom Fast Lane. I'll see you guys in the next episode.