Mastering E-commerce: Insights from Growing a Brand from $12k to $2.5 Million Profitably in 3 Years

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Read time: 4 mins

📆 Friday, 15th Dec 2023

Hi, and welcome back to Growth Espresso - your one-stop destination for everything e-com.

Yesterday during lunch, I found this awesome Reddit post in r/ecommerce. Written by u/datatenzing, it shares some fantastic tips for starting or growing an e-commerce brand.

The author talks from experience, sharing how they profitably scaled a brand from $12k to $2.5 million in just three years.

I knew I had to share it with you guys, so in this edition of Growth Espresso, I have condensed all the key aspects of his post along with all the data insights. Hope you like the read.

Mastering E-commerce: Navigating Today's Figures for Success - Insights from Growing a Brand from $12k to $2.5 Million Profitably in 3 Years 🚀 

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Part 1: The E-commerce Landscape Reality Check

Let's face it: the advertising spend for DTC (Direct-to-Consumer) e-commerce often surpasses the product cost. Your dollars? They're going to Facebook and Google for product discovery, inflating prices for everyone.

Digital advertising costs are soaring, causing cash crunches for smaller brands. It's tough out there, especially with rising expenses and an unhealthy dependency on digital ads.

For instance, in CPG (Consumer Packaged Goods), a 12-pack of carbonated flavoured water might need to sell for a whopping $48—not sustainable. We've developed an unhealthy obsession with digital advertising, often neglecting the evolving landscape and its increasing costs.

Part 2: The Optimization Gap

Let's talk numbers. Optimization stats for brands reveal a harsh reality: for every $1 million in revenue, an average brand spends about $300,000 on ad spend—30% of revenue. A fully optimized brand slashes that to $200,000—20% of revenue. This translates to a 5x blended Return on Ad Spend (ROAS).

But here's the kicker: it's a one-and-done scenario. Most brands would be thrilled with a ROAS of 2-3x. Yet, on average, across various channels, a 2x ROAS is considered good, while conversion rates hover around 2-8%.

Part 3: Recommended Framework

Here's the distilled framework that fits both the newbies and the seasoned players:

Ensure your product carries a 5-6x margin. The hero product strategy kicks in: offer reduced prices selectively through paid channels, but gate access via signups or limited-time offers.

The secret sauce? Data collection. Opt-ins, and subscription conversion rates—they're key. Data-driven decisions reign supreme.

Let's break it down with real numbers:

- Aim for a 15% opt-in rate and at least a 20% subscription to conversion rate. This means, for every 100 people clicking on your ad, expect 3-4 purchases—a 3-4% conversion rate from cold traffic. Your Cost Per Click (CPC) should range between $0.50 and $1.00, leading to a Customer Acquisition Cost (CAC) of $12 - $33.

Part 4: Leveraging Popups for Data

Yes, popups. They're not just annoyances; they're goldmines for intent data. Multi-step forms, coupled with live data collection, offer invaluable insights into customer journeys.

Let's dive deeper into the numbers:

- The double tap on the product page can boost revenue by an additional 18-20% through signups and up to a 40% subscription to conversion rate—high-intent data collection indeed!

Part 5: Retention: It's All About Smart Acquisition

Retention strategies often masquerade as secondary acquisition tactics. Understanding cohorts and intent signals maximizes revenue while balancing repeat purchase offers.

Here's where it gets real:

- As a general rule of thumb, focus on the first 45 days for repeat purchases, offering content and education post-purchase. Statistics show that if people don't buy a second time within 45-90 days, they rarely do at a significant percentage worth noting.

Part 6: A Take on Modern E-commerce

Let's delve into the trends and potential:

- For digital-only brands eyeing Private Equity or Holding Company sales, hitting $2M-$8M in revenue via two main channels might seem like the sprint. But here's the math: with a valuation of 1.8x - 3x (depending on margins), this can mean a net gain between $3.6 - $24 million for your efforts.

There's a trend to pay attention to—the rise of influencer-led brands. Creating a product isn't the hard part anymore; marketing it is. Remember, it's all about cost-effective marketing and getting your product into hands at the most affordable price.

Now, let's talk about hard data:

- Our current store's performance speaks volumes. From $12k the year before I joined, we've grown to an estimated $2.5 million this year. A $10-$12 First-time order CAC, $30 AOV (first order), 6% conversion rate, 20% repeat purchase rate, and a ~30% net profit—these are more than just numbers. They're proof of a successful strategy.

Link to the original post - Reddit