nextopia

With the most recent Christmas rush receding well into history, we caught up with retailer Stefan von Imhof of VP Games to learn about the really important stuff you need to become successful.

(Be sure to read the in-depth interview “Niche Retailing Online in a World of Wal-Marts: VPGames.com Case Study” we did with Stefan earlier this year. Part 1 and Part 2)  

What are the three most important metrics that you track?

1. Sales are the most important metric we monitor.

2. Non-paid or organic search traffic is next and something I check daily. There is no acquisition cost and I’ve found that organic traffic has a 1% higher conversion rate than standard paid search. You can’t ask for a better combination.

3.The other metric I closely track is conversion rate. Big box retailers talk of 5-7% conversion. I would guess that our conversion is .5-1% point higher than the average ecommerce site our size thanks to our merchandising efforts. (I think the best way for a site like ours to raise the conversion rate is to increase our product selection and organize it better. That’s where Nextopia’s site search helps us).

For a new retailer just starting out, what are three things you would recommend they do?

a. Avoid inventory risk

Watch your inventory because you can really get burned. It is really easy to stock up on goods and not realize the increasing risk you’re running. In future, you may not be able to sell them to cover your cost. Worse, you may not be able to sell them at all.

b. Watch your variable costs

You should know your fixed costs, those are simple. It is your variable costs that can kill you. For example, you might be spending $15,000 per month on advertising and be able to make money with a 1.8% conversion rate. But what happens if your conversion drops to 1.2%? You might start losing money. So you have to decide whether you can afford the same advertising budget. (This actually happened to us several years ago. We used to spend lots on eBay because the conversion was great. But the recession arrived and our conversion plunged. Because we were rigorously tracking our advertising spending, we knew very quickly we couldn’t sustain it due to the decrease in sales).

c. Partner with a good web guy

You want to have control over how your website looks, feels and operates. Assuming that you don’t know HTML yourself (and don’t plan to learn it), I think it is really critical to get someone on your team who can handle in-house development. In my experience, the last thing you want to do is rely on a third party. Instead, find someone who knows everything about the web or just learn it yourself. Even a basic understanding of Photoshop, HTML, Javascript, XML, or Python will go a long way in doing what you want to accomplish.

Benefitting from hindsight, what are some things that you did that you wished you hadn’t?

The number one thing I would have done is avoid eBay. And by avoid I mean use it sparingly. eBay used to be a big part of our operations, but we realized that we really didn’t have any control over the eBay selling environment. We started out very reliant on eBay. It was very easy to do and addictive. A friend of mine once said that selling on eBay is like a crack addiction – it’s easy to get hooked, to spend all your time addicted to the simplicity and easy cash flow that the platform can provide. But all of the things eBay can do (and does all too frequently like raise fees, and impose strict selling rules, etc.) are completely outside of your control. If you don’t have control, you can’t fix things when they go wrong. You don’t want your company’s futures dependent on the success of other companies. Use eBay and Amazon, but diversify. Instead of putting money into other companies’ pockets, focus on growing your own garden and control your own destiny.

What single thing that you’ve done has had the greatest impact on your business?

The greatest impact was investing in technology. Doing this represents a bigger up-front cost but it is well worth it. It has paid off big time as we’ve grown. By investing in internal web design and Python programming resources, we’re retained control and flexibility to do what we want. For example, we produce pretty complex shopping comparison shopping feeds. Without the internal resources to create them, I’m not sure we would have been able to afford to outsource its development.

The proverbial magic wand…If you could wave one and invent some technology that would make your days easier, what would it do?

There are so many things to be done. What I’d like is have is a robot that could analyze our site, aggregate terabytes of customer behavior data and figure out the best ways to increase conversion and turn as many shoppers into customers as possible. Also, if the robot could make a killer breakfast each morning, that would be pretty cool, as well.

My Favorite Thing: what I most enjoy about working in my business

Having your own business, owning full control of your working life is the truest sense of freedom in the world. There aren’t many things that you can do where you have a more acute sense of freedom than you do as an entrepreneur…starting something from nothing. I love being able to travel on my own accord and I love the feeling of being in control of my present and future. Even on the bad days, when things aren’t going well, I enjoy working for myself because in the end, I love solving problems and finding solutions.