Josh Hadley 4:25
That’s fun. Did you already have the idea for Profasee on your mind prior to exiting and that’s why you’re able to so quickly do it? Or was it just kind of like you had some free time you’re like, this is it. This this is the next thing.
Chad Rubin 4:40
It’s funny. So we sold April 2021 Skubana and it was a great exit. I helped with the transition and then I resigned in from Skubana on October of 21. During that time, I did a lot of self-work. A lot of I would say upgrading myself to a different version, hired coaches to just be the CEO of me And during that time, I was like, had a little notepad where I’d write down things that bother me. And I started working back on my e-comm company as well to try to improve it. Because it was starting to deteriorate because it hadn’t gotten a lot of love for me. So long story short pricing, I started asking the question, why, right? Why is pricing the way it is? How are we pricing our products? Why are we not changing our price? Is pricing is acceptable to change price on Amazon, why is nobody doing it, and started forming a hypothesis that there’s like billions of dollars that are being left on the table, because nobody is pricing. And then I started exploring while doing it, manually running a spreadsheet, and then started really digging into AI, which, by the way, is a buzzword that’s thrown around, often talk about more, but started really working on building a world class model with real data scientists to help a lot of brands on Amazon optimize price, which leads to maximizing profit.
Josh Hadley 6:01
Yeah, I love that, well, there’s so much that we can dive into here. One of the most important things that I love, though, Chad is that you have your own e-commerce business as well. So you’re not just sitting from the sidelines of like, I think this is what would be nice for people in the e-commerce Industry, you’re an actual seller, you’re in the trenches. And so you’re solving real problems that you’re facing in your own business. So with that, let’s continue down that path of Profasee and pricing. And then we’ll kind of flip the conversation, we’ll go down the AI route as well, because I know there’s a lot that we could talk about there. So let’s talk about pricing. First, because I’m a huge believer of this, specially in the inflationary environment that we’re in, where a lot of sellers honestly are letting their margin just get you’re watching it, you wrote away without doing anything. So tell us more about that your experience with Profasee and what you’ve seen?
Chad Rubin 7:02
Yeah, well, so my company, we manufacture vacuum filters, coffee filters, air filters, it’s a commodity. And we had a good beautiful year, a great year in 2020. And then 2021, we saw some softening, which led into 2022. So there’s PPC inflation, there’s your cost of goods sold inflation, there’s saturation in my category, and it’s at its peak, we have Chinese sellers, selling against us trying to convert from renminbi to US dollars. And so there’s all these things that are happening. And my profits started dwindling, there’s a lot of profit pressure, a lot of compression happening. And so I was looking for new ways to unlock profit. And I think pricing is a lever that is the hot biggest lever that flows to the bottom line. And it’s a huge blind spot, and nobody’s making a change to price. There’s all these agencies out there that are saying, hey, like what will change adspend? And if you look at the equation of a cost, which is your ad spend relative to your revenue, and they’re only changing one side of the equation. It’s like having a peanut butter sandwich and not having jelly on it. And those two things go together.
Josh Hadley 8:10
So true. So true. And so many people overlook it. And honestly, there hasn’t been many tools in the Amazon space to be able to test prices. I know Splitly is probably the most common one that comes to people’s mind. I know I’ve used it, didn’t love it. And so we retired it. So tell us more about Profasee. What is your guys’ software tool do? And walk us through some of the strategies of how to use this?
Chad Rubin 8:40
Yeah, sure. So initially, I was doing pricing manually. So I would have a spreadsheet, look at all my competitors, look at my conversion rate, look at my sessions. And that simply was not a scalable idea, right, because you can increase price, then understand what the effect is, there’s a knock on effect to increase in your price. And then you can also decrease price, increase velocity and see how that affects the overall probability of your business. And so the beautiful thing about true AI real AI is that it’s faster than us, it’s cheaper than us. It’ll make far fewer mistakes if you train it correctly. So my thesis is building an AI first business with pricing in mind that optimizes to maximize our intention, which is to maximize profitability, what is the sweet spot of pricing across your skews. And it’s not just making changes in a vacuum mean like severely was ahead of its time as an old school software, not leveraging AI, but it wouldn’t factor in competition. You can’t make changes in an amazon marketplace that’s dynamic without factoring competition. So we’re pulling in all the signals, like we’re talking about billions and billions of lines of data. To here are what is the signal in the noise to maximize the outcome that we’re training the model around which is profitability?
Josh Hadley 9:56
Interesting. So how do you take into consideration seasonality because I hear you, we’ve done the same thing for ourselves. We’re tracking price increases via a spreadsheet, BSR rate BSR ranking. And then we’re also looking at the top 100 sellers, right, making sure that do we stay in our same between one to 10? Or do we start falling out of that if we raise our price, that’s been the only way we’ve really looked at it plus conversion rate. But for us, we’ve seen there’s just a lot of seasonality, right, one week could be, let’s say the week before Black Friday, right. And sessions might be down and your conversion rate, there’s just a lot of people preparing and putting stuff into their basket, so that conversion rate might be down that week, but then the next week conversion rate goes up because of external environments. So how does your guys’ software take all of that into consideration?
Chad Rubin 10:59
Well, we plug into the amazon seller central API in the ads API and believe in the seller central API, we can go back 18 months in the ads API, we can go back six months, but we’re pulling all that in, right. And pricing is not about one signal regiments, you’re mentioning sessions, right? It’s about a series of signals and a series of patterns and unlocking decisions. And it’s a series of decisions that need to happen over time to maximize profit. So it’s like this, like, supercharged pattern recognition engine. And so we’re just pulling in all this information, training the model over time. So we’re building a proprietary model, there’s nothing that’s like off the, it’s not like a model that we’re finding that’s on a website, right? We’re building everything from scratch. And we’re not just using it in our h1 tag on our marketing website. We’re actually AI first and what we’re building is working, which is even cooler thing.
Josh Hadley 11:54
That’s fascinating. So at the end of the day, is it just tweaking your price on a consistent like, is this on a daily basis? It’s testing out different prices? How often is it changing prices?
Chad Rubin 12:06
Yeah, so these are great questions. So by the way, we’re learning and the AI is learning. And the most beautiful thing is that not only are humans capable of self-improvement, but so our AI, so is AI. And so in our first cohort with customers, we got feedback. And the idea was, there’s a saying in software that if you’re not embarrassed by your product launch, you’ve launched too late. And, like we had serious learnings to happen from our first cohort of customers that we’re piloting, including myself. And so we integrated a lot of that feedback into our second cohort. And so one of those learnings was that sellers and brands don’t change pricing often. And so what that means is imagine you go to Facebook, and there’s no pokes, there’s no lights, there’s no one that you follow, there’s no dwell time on videos, Facebook wouldn’t know what to serve you, there’s nothing for it to chew on, right? There’s no like meat to chew on. And so in that same vein, Profasee had nothing to chew on, because people weren’t changing prices. And they didn’t know how the market would react to price changes. So in our second cohort, we’ve developed this, we call it the hyper learning phase, where we go through a month of incremental small changes to price that are done on a profit neutral basis that it can learn from and improve from what it finds and then start to deploy the optimal price to the channel. And we do it dynamically. And just to be very clear, we only do this for private label brands like Amazon digitally native brands, we don’t work with resellers. Or if you’re trying to compete for the buy box, there’s plenty of tools out there that do it. We are exclusively focused on winning the search engine ranking page on Amazon.
Josh Hadley 13:41
Interesting. And I think that’s an important thing to call out. Because there’s so many repricing software’s out there that are just simply like trying to own the buy box. They’re not necessarily there to maximize your profitability. So I think that’s a huge differentiating factor. And like, this is meant for private label sellers, if you have your own brand, great tool to be using. So I want to ask you the question, Chad, you’ve gone through multiple exits, you have your own e-commerce brand. Why the focus on pricing, and why is it so important at the end of the day?
Chad Rubin 14:15
Yeah. So Well, firstly, the reason why I was focused on price was that I’m still working through it. I’ve been working on turning around my ecommerce business, it’s been deteriorated over time, didn’t get a lot of love for me as I’ve been building other initiatives in my life. And so, for me, I optimize spend and my A costs, and I’ve been optimizing our conversion rate and my listings itself and the infographics on those listing pages. But the one thing that’s driving the most to the bottom line, it’s a very small lever and it swings big doors, but it’s not being swung was priced and I just couldn’t understand why. Like we if we have a $10,000 ad campaign, you would never leave it unoptimized, right? Oh, optimizing it. So why is nobody optimizing price because a it’s hard to understand. And it’s very manual. And by the time you make the change to the price the market shifted. So this is why I focus on it. And it’s a juicy, it’s a delicious problem.
Josh Hadley 15:18
It really is. And it can provide, I mean, it’s a huge impact to your bottom line, right that if you want to increase your bottom line, the best way to do it is just by raising your prices. Roland Frasier, one of the previous guests that we’ve had on the show, one of the things that he does first when he acquires any businesses is he simply raises prices. Because to your point, so many brands do not touch their price, they’re too scared to be honest with you, because they’re like, well, I like sales, where they’re at, if I raise them, 10% 25%, I’m going to lose it all, right. And I think I actually fell in that camp, prior to all of the inflationary environment that we’ve been in recently, with Amazon continually increasing their FBA fees, you’ve got manufacturers increasing the cost of goods that you’re purchasing from them, a cost is going up, or adds. So with all of that, like, our back was against the wall, although I felt like hey, 1999 that’s the tipping point, you go over the $20, like, you cross that mental bridge of $20, and something cents, all Heck’s going to break loose, right, and I’m just going to be in a downward spiral lose my market share. And on the contrary, we raise the price by $5, increase the price by 25%. and still maintain, we were currently the number two best seller in that entire product category. Didn’t move the needle, we stayed right there. Now we’ve got more profit coming to the bottom line. So I want to ask you the question, Chad, like, are you seeing the same thing with a lot of the clients that you’re working with? And these early users of the software, that there is more room to increase prices on Amazon? And it’s not affecting organic rankings? Or it’s not a spiral downward? Or are you seeing the opposite true of hey, really, like lower your price? Yeah, you get margin compression, but man, you shoot to the roof and you stay locked in and those top positions? What have you seen?
Chad Rubin 17:24
Well, okay, so Profasee in general is about maximizing profit without sacrificing your BSR. So there’s a lot of people in the Amazon space that say, just raise prices. And that’s a lot of times could be reckless advice and insight, right? Because like pricing isn’t one size fits all. And yes, pricing needs to change. But the question is, should it go up, or should it go down, because you can increase price, and that may offset demand, and you can lower price, it may spur demand, it’ll increase velocity, and it could produce more absolute profit dollars to your bottom line. And you can lower BSR as well. So like, there’s also a knock on effect that happens on Amazon, like the flywheel. But I hate to talk about what needs to be talked about, which is like the price today impacts your orders tomorrow. And so nobody knows what that sweet spot is. And just because you raise price tomorrow doesn’t mean actually it should be lowered two days from now or three days from now. So like I said earlier, pricing is a series of changes need to happen, a series of decisions that happen over time, based on pattern in the data. And I don’t believe that pricing should be stagnant. I think it should be dynamic all the time. It’s kind of like Uber surge, right? Uber has changed as a pricing for their drivers all the time. Nobody even knows that search environment anymore. But they know the right price that’s going to maximize their profit on each ride. And Amazon sellers don’t even Amazon, by the way, changes price. So anyway, that’s a long way of me saying that pricing needs to be dynamic. And it’s not one specific decision that needs to happen.
Josh Hadley 18:56
Yeah. Well, it’s interesting. I started my career at American Airlines, right. And they have huge revenue management departments. Because pricing is dynamic, right? They’re always changing the fares on a regular basis to see what’s the competition doing, how full is my plane? Are there certain events like big football is their Super Bowl going on in this weekend? Well, in this market, I’m going to increase the fares because there’s going to be much more demand. So I mean, that’s such a good mindset shift for I think private label sellers to look at their pricing instead of like, well, you get to your maximum price, and then you just leave it there, right? And instead, like you should be dynamically pricing. So Chad, would you mind walking us through like maybe what are some situations? I know a lot of this is AI driven. The like, is the theory correct that like, hey, maybe if your product sells best during q4, is that when you maximize profits and like the demand is so strong that you can raise prices there because it’s your peak seasonality, but then maybe on the offseason times, like maybe that’s when you have to decrease your price. I’m just throwing out ideas here. But yeah, what’s been your experience that way with dynamic pricing?
Chad Rubin 20:14
Yeah, and but before I even get to dynamic pricing, I think it’s important if there’s going to be a takeaway for the community of listeners that are listening. Like when I have my l 10. meeting with my team for my e-commerce business, by pricing is talked about, right, like, we made sure everyone is aligned around pricing and pricing is front and center in our conversation, right? Because pricing has a massive trickle down effect. So that’s one thing I think that most don’t talk about, right. And you sort of tie those departments together, pray whoever’s responsible pricing ties to finance ties to listings, ties to ad spend, everything is intertwined, right and connected. So connecting those dots is very important if you’re doing it manually. As it relates to dynamic pricing, there’s all these factors that are flowing into our model, right? So there’s signals, there’s your own price, there’s your reviews, there’s your competitors price, their BSR, your own BSR, we do a reverse acing lookup on all your keywords, find your competitors for those keywords. So we’re pulling all this into a model. And right now, it’s informing the model so that we can change pricing that’s optimal. Now, before you even begin using Profasee, or even before you even begin changing pricing, you have to know your intention for your product for your Asin. So you might be in your honeymoon launch period of a SKU, and you just want to get rank. And that’s not what Profasee’s focus is. Our focus is on mature Amazon brands who already have velocity to want to harvest profit. And so knowing that going in, if you’re like, hey, Chad, I want to liquidate product because its expiration is coming up. That’s not our focus at the company. And maybe over time, we develop more models to enhance rank or to enhance liquidation. But right now, it’s exclusively focused on profit.
Josh Hadley 22:08
But it takes ranking into consideration, maintain BSR, right?
Chad Rubin 22:14
That the goal is to maintain BSR. Our goal isn’t to maximize BSR, like the primary goal is to maximize your contribution profit.
Josh Hadley 22:22
Yep. Makes a lot of sense. So I would imagine for a lot of our listeners, this is one of the best tools you should be using, those 12 to 24 months prior to an exit, right? Where you want to squeeze the juice and make sure that that bottom line is looking as good as it possibly can be. Do you have any case studies of people that have used your software in preparation for exits and all?
Chad Rubin 22:47
Yeah, we’re working with a ton of aggregators, we can back test or model to see how much money is being left on the table. Like there’s a lot of work we’re doing behind the scenes. And like, let’s just say a 1%. change in price could increase your bottom line by 11%. And let’s just say that 11% is $10,000. Right? You annualized that? That’s 120k. I’m just giving you a hypothetical. And you apply a three conservative right? 2023 number, conservative recession multiple of 3x. And like, that’s significant dollars in your pocket. Yeah. So we’re working, we’re doing a lot of that behind the scenes working with a lot of brands that are working towards an exit for sure.
Josh Hadley 23:28
That’s awesome. Let’s turn the tide now, let’s talk about AI. So you’ve got a lot of experience using AI Profasee built around AI as well. Can you give us a few examples of ways you think e-commerce sellers should be incorporating AI into their businesses?
Chad Rubin 23:48
For sure. So by the way, AI is thrown around. And so I just want to be very clear, is that AI, true AI, right, will observe will experiment and will learn independently of a human that’s built it. So a human can train it, but then it’s self-learned improves over time, right? That’s true AI. So there’s a lot of companies in the Amazon space and just pointing this out that it’s human logic masquerading as AI, right. It’s just an if then statement, and that’s not AI. So our AI creates its own being a nice haunt in the background. Our AI essentially has nested if then statements that and many nodes of if then statements to get you to the outcome that you want to achieve. Now pricing is just like one small part of where you can leverage AI. There’s a lot of opportunity, in my opinion, and a lot of green space to innovate in this space right now. And I’m like, front and center focusing on it. And one of the reasons why I think AI is going to be probably of most importance in 2023 is sellers need to do a lot more with less, and there’s no short I have insights and dashboards in our space. But then you have to actually act on those dashboards act and create and like, take insights and convert them into decisions. And that’s where AI comes in. If you look at some of the top aggregators, they are all focusing, I think, to me, there’s going to be this focus of the rise of the algorithm in 2023. And that shift will happen, and those that are smartest will be the first to adopt it. And if you look at what’s happening in the Amazon space, specifically, you look at the biggest aggregators, they have the biggest budget to spend on this stuff. And they’re recruiting like crazy to build their own in house algorithms to make decisions because, well, their decisions have been that they’ve made are flot.
Josh Hadley 25:42
Interesting. What are some of the example like, can you give us a few examples of like, what type of decisions are they making that are flawed that you think AI could be making better decisions?
Chad Rubin 25:52
Yeah, of course. So pricing, right? Spending, ad spend demand forecasting, listing optimization, even finding out like what characteristics to buy in a company based on what they’ve learned so far, of their mistakes. And again, it’s all about observing, learning, and shortening that learning curve, like it’s okay to make mistakes, because how quickly the AI can pick up on those mistakes and pivot to maximize the outcome you want to achieve. So we’re like in the epicenter to me, like, crypto was always interesting, but it wasn’t revolutionary the way that AI is. And if you look at, in the call earlier, return ChatGPT that to me, when I saw that, and I saw what it can do. I was like, it was like seeing Google for the first time when I was in elementary school.
Josh Hadley 26:43
Yeah, that’s very true. What do you see? How are you currently using AI? Then would be my question it with your current e-commerce business? I know you’re currently restructuring that, bringing it back to it’s fruitful days. So how are you utilizing AI? You’ve got Profasee that you’re using that your AI tool for pricing. But what other ways are you currently using AI?
Chad Rubin 27:10
Oh, man. Well, so firstly, Profasee, like, the beautiful thing is we’re building this proprietary algorithm. It’s fantastic, right, but then there’s like the actual text work. So for example, ChatGPT has version 3.5 That was released with a dialog box. And that dialog box, each thread can be saved and can be trained, right? So I shared earlier that I run Think Crucial. And I’ve been working on turning that business around in many ways to rationalizing better forecasting, better demand planning, optimizing on price, optimizing our infographics. So an example would be we make a vacuum hose, that vacuum hose. I don’t know much about vacuum hoses, right? But I know enough where I can talk about hey, I know the vacuum hose will suck up more dirt, improve the overall healthiness of your indoor living space and get rid of dust. Now, you can essentially train ChatGPT to come up with infographic headlines for your listing. And he came up with it like literally I said, create bullet points for me around a benefit headline for this vacuum hose. And I trained it of course. And so there’s a lot of like, tailoring that’s required to get you to the outcome that you want to achieve, just like anything else in AI. And he came up with this, like, what headline was like dusty Don, and I was like, boom, right? I was just like one headline that I use the infographic, but like, think about how much time it saved me. And so it’s just I’m giving you one example of me using it in my e-comm business, but I’m actually using it like through a lot of parts of my life right now.
Josh Hadley 28:51
Could you share some of those other ways that you’re using it out of e-commerce? Just because I myself, I’m wondering, like, I’ve had the same questions with ChatGPT of like, this is so powerful, what are the different ways that I could utilize it even in my own life? So would you mind sharing that even personally, what you’ve been for?
Chad Rubin 29:11
So you can use it for creating responses. And so initially, I had like, two different screens open, I might my main screen on my other screen. And you can use it to revise and edit copy, right? And so sometimes you want to like, put some ideas in something and plant some seeds, and then have the copy be built for you in an email response. And so I was doing that. And I was like, wait a minute, there has to be like the first of all, this is amazing, right? It’s an editor reply for me in an email. But why is there no Chrome extension or software out there? Because ChatGPT can technically write emails for you. Right? I started researching and this is gonna probably go to one of those end of the podcast questions, which is like, what software Am I using right now? That’s a game changer. So I found the software called ELLI AI. Okay, okay. an ELLI AI essentially a Chrome extension, it goes into my Gmail, and it has different tones. So it has like interested not interested, disappointed, excited, I can hit a tone and hit reply, or respond, and it will respond based on what it believes in the thread should be the next response. It is so freaking cool. And even if it takes me only 70% of the way there, right, yeah. 80%. I mean, I’m sure Josh, you get a lot of emails. I get a lot of like, we all are just inundated with emails that require responses. And like, what if you can even cut down the response time. So I have my inbox shattered. Right now I have a shadow in my inbox, which is a VA. But now, I can essentially maximize the potential my VA, where we can run ELLI AI, get us 70% of the way there, she does the remaining 30%. And now she can be doing other things that are high impact for me and for the company.
Josh Hadley 30:58
Totally agree. I think that that’s one of the first things that people do is try to outsource their email inbox management, especially as you get busier as a CEO. And yeah, you hire that VA. Well, the great thing is, too, I mean, you can even get, I’m definitely by no means an English major by any stretch of the imagination. But like having well-articulated emails generated by AI, it’s going to make you sound smarter. And I remember one of the things that I got feedback for when I was working at American Airlines, like, I’m straight into the point, whenever I get feedback, and so I think like, you could build that AI imagine to say, hey, start with something nice about the person. Hey, thanks so much hope you’re having a great day, blah, blah, blah, then lead into your next message. So you don’t come off as cold right? To some people.
Chad Rubin 31:54
So a few things that you can train the dialog box, which, by the way, once 4.0 comes out, it’ll even be more revolutionary. But you can use the dialog box, that’s great. This Chrome extension, they have a prompt built in, that can train you on your style of writing. So you don’t have to keep on retraining the thread. It’s really, really fascinating.
Josh Hadley 32:17
So cool. What else? What else do you use an AI for?
Chad Rubin 32:21
Well, I’m using right now I’m actually experimenting with, remember I said earlier on the call that pricing and spend go together? Yep. And right now everyone just focusing on like one side of the equation, which is the A cost? And they’re focusing on what they said they’re saying, my target. So before there was these PPC tools, right, that you can set up goals, and forget it.
Josh Hadley 32:51
And that’s all right?
Chad Rubin 32:53
Breakeven a cost, right. But it’s focusing on what you make, not what you keep. And so I believe that there’s gonna be a shift into your profit on adspend versus your return on adspend. I think people are focusing on the wrong metric. And I’m right now working on training models with pricing in mind, because pricing, informed spend spend doesn’t inform price. And I think a lot of people get that twisted. I’m building my own proprietary system around that. But when it comes to like, text, write content and text, ChatGPT is just incredible. So I mean, you can use it really in all walks of life, right to improve responses. And I’m very short when it comes to text messages. So I’ll give you another example. Right? I want to have an honest conversation and openly share. Yeah, so I grew up overweight. And I’ve always been scared about reverting back to that. And so I’m constantly cooking for my family. And now that I’m restructuring my e-commerce, business, and managing Profasee, which is a startup, I find myself needing more time to get like work done. So I can actually focus on spending more time with my family and not cooking. So I was in hire a private chef. And we have a lot of dietary limitations in my family. So I outlined all these dietary limitations and there’s a lot to the chef to do meal prep. So meal prep once a week for us get everything stored in our fridge and saves a lot of time. It’s worth it to do the shopping for me as well. So I gave him a list. She came back and create a menu and I’m super short on text. I was just like, This is not exciting me, right. That was my feedback. Pretty much. I probably could have been a little better with my feedback. So she wrote back saying hey, like based on this, it’s not a good fit. Okay, peace and love. Not good fit. I’m surprised at the response but okay, give him a it was a lot of money. So give him fine. I’m going to get my money back fine. And I was like, okay, maybe I was a little bit short with her. But why don’t I throw a mess quick response in the ChatGPT and it can make it even better. Better that’s more thoughtful and more curated based on my initial intention, right? It’s about setting your intentions and baking that in into the response. And it created the message with a lot more empathy and in much more detail. So it’s just another I’m just giving you a small example of like the kind of power that’s at your fingertips. And then she wrote me back a message. And like, it was great, we ended the relationship in a very healthy way. But like I have a lot of other things to worry about, then my chef who decided to quit.
Josh Hadley 35:29
Yeah. What a great example. And I think it can save you so much time, have you come off, you know, it’s more empathetic. And just saving a lot of time, I fall into that same bucket don’t have a lot of time. So you get a lot of quick responses where same thing maybe that empathy doesn’t come through that text or the email very well. Chad, let’s pivot our conversation now into your e-commerce business restructuring that you’re going through, tell us more about what you’re doing there to kind of resurrect your e-commerce brand.
Chad Rubin 36:02
So it’s a very mature brand I’ve been selling on Amazon since 2007.
Josh Hadley 36:08
Been around since the beginning.
Chad Rubin 36:11
Yeah, I’m definitely an OG. And, like, I was probably one of the first direct consumer Amazon brands margins, were probably in the SaaS margin profile, and have deteriorated ever since. Because there’s been a gold rush, let’s say like the Gold Rush started, I want to say in 2015 2016, dating back to probably like amazing.com. And it’s certainly a lot more competitive. So in that process, right, I started focusing on other things that light me up, right, Prosper Show, Skubarna. And I just say that I didn’t get the proper love and devotion and attention that it was needed. So now you fast forward, I’ve inherited a business that hasn’t gotten a love. It’s very dusty. The listings are dusty, and needs SKU rationalization, there’s been a lot of copycats in the space. And so I mean, everything is on fire pretty much. And actually, I think we’re going to have a good month this month, but it’s been taking me about three months to catch the falling sword. And so what have I done? I’ve restructured the entire team, I create an org chart. I’ve hired specialists in each department. Instead of hiring like generalist roles. I’ve hired like spear fishers, I’ve been working on SKU rationalizing, we have 550 SKUs that are all private label. Not including kits and bundles, which gets us to like 1000 something listings. So I’m going through a lot of SKU rationalization,
Josh Hadley 37:40
What do you mean by that?
Chad Rubin 37:41
So creating criteria that. So for example, I would say something like anything that is below a specific amount of turns, that is below a specific net margin that has less than one velocity per day should get caught. That would be an example of a skew rationalization practice where we’re cutting skews to make the business more efficient, easier to manage. That’s an example. Another example is like right now, I’m just like, unloading on you, right? Because it’s all top of mind, and hopefully this is helpful for someone listening.
Josh Hadley 38:16
I love it. I’m taking notes myself.
Chad Rubin 38:18
So, I’ve been in a three PL for like 13 years or something. And they do all my pick and pack. They do my D to Cs business off Amazon, they do all my FBA workflow, and they do my kits and assemblies that go to FBA as well. And so why not do those kits and assemblies in China? As an example, why not inject that directly into the Amazon distribution centers directly from China versus using labor, that’s very expensive labor to do that work. So these are just a small amount of like, infographics, as well, there’s a slew of things that I’m like, firing on every cylinder to turn this company around. And I’m leaving no rock unturned. I have also implemented and l 10 meeting, which is an EOS meeting that initially we had somebody come to facilitate it to get everything out in the open and alignment across all the functions of the team.
Josh Hadley 39:16
Yeah. How big is your team right now for that business?
Chad Rubin 39:20
So right now we have to like general VAs, we have someone just specifically focusing on inventory forecasting. We’ve got Profasee doing the pricing, we’ve got a catalog manager, and we have a PPC person internally. So how many is that? Is that five?
Josh Hadley 39:37
Yeah. So pretty lean team. Then a you said you’re kind of restructuring it. What is your org chart look like now? Right? You’re hiring more people are spear fishers. Right? Specialists. Like tell us more about that.
Chad Rubin 39:54
Yeah. So it could be like find somebody to just do all my Amazon health issues, right like We make replacement filters to fit specific models. And so hiring someone specific for that could be that none of my, all my ASINs Believe it or not, we’re a one pack and a two pack and a four pack. We’re all separate ASINs on Amazon, well, you know that if you merge those ASINs, you get the reviews together. And the one pack that to pack before pack and all live in the same listing. And so finding somebody to do all of that work, and there’s a lot of work that needs to happen, because they have to identify what are the different kits, where are the bundles, how they should be merged, which should be the parent versus the child, and the dependencies that are interrelated. So those are some examples for you.
Josh Hadley 40:40
Awesome. I love that makes a lot of sense. And then down the road. So you’re heavily involved in those meetings. So you’re involved in the level 10 meeting, I would assume and kind of helping coordinate the work of those five team members, then right now, is that true?
Chad Rubin 40:55
That is a true, that is a true statement. And that’s why I like ChatGPT or any AI that I implement, that can save me time and save me hair loss and save me money is amazing.
Josh Hadley 41:06
Yeah, totally hear you. That’s great. Is there anything else that you wanted to cover as it relates to restructuring or even incorporating AI that we haven’t touched on yet that you think our audience should know about? Or be aware? And then maybe I think I’ve kind of created another question in my mind of that, we’ll take this as Where do you think the future of Amazon is going? Like, what does it look like five years from now as a private label seller from your perspective? So kind of a two part question.
Chad Rubin 41:38
So I think I’ve shared openly about how I’m leveraging AI. And like, the components of AI that’d be implementing today. Right? I do think that there’s a sense of, in an Amazon business, the early adopters are the ones that end up winning in the long term, and that compounds over time, the quicker you can implement AI and adopt what I’ve discussed today, the better off you’re going to be because I think the strong and the smart, are the ones that are going to survive. As it relates to Amazon, I mean, right now, I’m pretty bearish on our economy, specifically e-comm went through a amazing, flourishing wave during the pandemic, and I think consumer spending is going to drop. I do think Amazon is going to be a great place like, where do people go, when they want to save money, they’re gonna spend less money on Shopify, on direct consumer non-discretionary goods, and focus on discretionary goods, commodities. And that’s really the Amazon marketplace is really good at that. I guess I’m pretty concerned around our global economy, and the softening, particularly China specifically, and I posted on LinkedIn a little bit about this, and finding redundant supply sources, for those that have tremendous Chinese exposure to suppliers, I think is going to be important as we move forward.
Josh Hadley 42:58
Yeah. I’ve heard that in the past. We had Steve Simonsen on the podcast as well. And that’s something that he highlighted, right is you he definitely encouraged in the political environment that we’re in to start looking for some alternatives. So you’re the second tech of that segment.
Chad Rubin 43:16
Yeah, I think that’s your call by Steve. And I’m seeing it right now. I’m dealing with my suppliers. Right now there’s a COVID outbreak in China, they’ve had zero COVID policy in place. And it’s unlikely, like we’re not even at the Chinese New Year yet. And they’re already telling me, hey, like, we may not be able to deliver on these drugs. And so I think finding other sources of supply are important. The problem is that like most of the manufacturing capabilities are in China, all machinery is in China, and the cheap labor is in China. I don’t envision that to be the future for much longer, because of the one child policy that happened in China and they’re going to have, say, younger work labor shortages, because of that policy that they’ve implemented.
Josh Hadley 44:01
It’s true. So with that being said, what’s the seller to do? What should they be doing today, with a gloomish outlook, so to speak?
Chad Rubin 44:09
So I think the CPG companies, like companies that are making things that eat right, those are that’s happening United States? And so what do you do? I mean, you try to find alternative sources, and seeing about maybe transferring machinery into United States. And there are, by the way, tax breaks, you can get for machinery, you can get SBA, there’s some advantages that you can get by moving production into America if you can, right. And if you don’t want to finding other global sources, that maybe can produce more efficiently and for the same price or maybe a little bit more money. And that takes a lot of work. Right. It takes a lot of research to figure that out. And I figured that out, by the way, because I have so much exposure in China, with my commoditized items that yeah, I have tremendous exposure to that. And that’s a big risk.
Josh Hadley 45:01
Yeah, it is much easier said than done. But one that I think people should keep at the top of their mind and be prioritizing in their business. So thank you for articulating those points from your point of view. Now, Chad, as we wrap things up today, I love to leave the audience in our listeners with three actionable takeaways from each episode. So Chad, here are the ones that I’ve noted. Let me know if you think I’m missing something. So number one, from our conversation today, you should be walking away with a greater emphasis on profits and pricing for your business. I think overall, so many businesses, and private label sellers haven’t tested their pricing, or considered raising their pricing recently. And because it is such a barrier to kind of understand what kind of impact a decrease in the price could bring, or an increase in the price could bring, most people just leave it alone. I think that, like you mentioned, the aggregators are on top of this, they’re going to start using it. So it’s going to be the strong, and the smart sellers that are going to be able to survive three to five years from now. So starting on that today, and I would give a shout out to Profasee, what a great AI tool to use, that’s going to maximize your profits and make sure that you maintain that BSR. So step number two, or action item number two, is think about and strategize ways to incorporate AI into your business today. If you’re not the creative, and visionary type that loves to think about new business ideas, what I would start off with is task your team to say, hey, with all of the responsibilities that you guys have going on, how could you utilize ChatGPT in your current workflows and see what ideas your team comes up with. And that’s one of the things that I’m going to be tasking my team early on here coming up is how do we incorporate ChatGPT into what we’re doing to save time. And then last but not least, the third takeaway is to make sure you’ve kind of batten down your hatches, so to speak, this kind of correlates with your pricing, but it also coincides with your supplier relationships. And this kind of layers up into I would say an even bigger topic, which I would just say is get really clear with your organizational structure, and making sure that you’re firing on all cylinders. And it’s easy as a visionary CEO, sometimes for you to say, hey, I’ve hired somebody that supply chain, I’m not going to have those conversations with them that they’re going to run things. What you talked about Chad is like that level 10 meeting from the EOS framework is so vital to a business we’ve been implementing. We’ve had it implemented in our business for a year now. And it helped us run faster than we ever imagined. So firing on all cylinders means everybody on your leadership team knows the direction that you’re moving forward with. And you guys are solving issues. Because every business is going to have issues that pop up, but you’re solving them repeatedly. And everybody’s on the same page. So those are my takeaways. Chad, anything else you would add?
Chad Rubin 48:23
That was Josh, that was really eloquent? Did you put that into ChatGPT? Or was it off the top.
Josh Hadley 48:28
Well I was going through here, and through my script? Sadly, I would like to say I was incorporating AI.
Chad Rubin 48:37
That was really good. That was great. It was a great summary of what we discussed and the takeaways for sure.
Josh Hadley 48:41
Awesome. Well, Chad, as we wrap up our conversation today, what’s been the most influential book that you’ve read and why?
Chad Rubin 48:52
It may seem like a trite example, Four Hour Workweek was ahead of its time by Tim Ferriss and inspired me to make some serious changes in my life and move off of Wall Street, essentially, literally gives you a script of what to get your boss to work one day a week from home. This is before like remote work was even acceptable, and encouraged me to go down the entrepreneurial path. So it was just like a big pivotal book in my life. That being said, I’ve read a lot of books. But that was definitely a pivotal book.
Josh Hadley 49:21
That is a good book. I remember reading that book as well. And I do agree, I think it was ahead of its time. But it laid a great foundation for I think what we’re experiencing now so it’s a good one to go back and reference.
Chad Rubin 49:35
Yeah, I mean, if you want I can mention like maybe two other books that have been are great that I love. The Almanac of Naval and it’s called the vomit and I’m not sure if you’ve been following the content. He’s a business philosopher, and he’s known for his tweet storm rally business and philosophy, but he’s someone wrote a book about how his subject matter and it’s really great. It’s really a great book. That’s, that’s a good runner up that I loved. If we’re talking business books, The Great CEO Within is a playbook on being a CEO and like covers all the challenges that you may come up over time and how to deal with those challenges. Those are a lot of self-help books too. So, but these are good business books.
Josh Hadley 50:23
Those are solid, solid recommendations. All right, Chad, next question, you kind of already answered it earlier in the episode. So I’m going to ask if there’s any other softwares that people should be using. But what is your favorite or game changing software that you’ve been utilizing? Talked about le.ai. Any other AI software’s or other? Anything in general that you would recommend our sellers should be listening to?
Chad Rubin 50:49
Right. It’s elliai.com. Yeah, ELLI, and probably they don’t pay me to recommend this. I’m just a fan, right. And I want to share stuff that I’m a fan of other software’s like I’m a fan of Notion. I’m a really big fan of Notion, you can do so much in it. You can use it as a wiki, use as a project management software, you can use it personally, you can use it professionally. And you can use all these templates that are built already for you. So I’m a big Notion fan. I use it both in my software company Profasee, along with my e-commerce business with different sections. That’s a good software that I love. Outside of that. I love using software. But those are the two biggies that have come across my desk recently.
Josh Hadley 51:32
Awesome. All right, last question, who is someone or a group of some people that you admire or respect the most in the e-commerce space that other people should be following? And why?
Chad Rubin 51:43
So this is a really interesting question. I’m very particular of who I’m getting advice from. And the people that I am getting advice from, I’m staying very close to them. So meaning I’m text messaging them all the time, I’m trying to set up at least weekly, or every two week conversations. So for example, like Brandon Young, I have him on text to go through things as we both go through things as an entrepreneur, Steve Pope is another one, by keep pretty close to me. So I think if anything, I would encourage people to find the person who can be supportive, who can like really listen to you, and give you sound advice. And you run the risk of taking advice from people who were the advice isn’t so sound. If you have ever seen like Game of Thrones Hand of the King. And that’s why the Hand of the King is so important. And they you know, they pull the pin off of his jacket very quickly, or his or her jacket very quickly. Because it’s all about the people you surround yourself with. And so I just would encourage people to take a look at their port, like, who they’re communicating with, and evaluate that and keep those people that they really want to get close to on speed dial.
Josh Hadley 52:54
Yep, you are a summation of the five people that you hang out with the most right and interact with the most. So it is definite, wise advice to kind of do some inventory of who are you spending time with? And what type of value are they providing to you? And are they helping you uplevel your game in your mindset, as well.
Chad Rubin 53:17
Yeah, there’s another quote where it’s like, you don’t want to be the smartest person in the room. But the feedback that I just shared was you want to be the one that’s putting the room together?
Josh Hadley 53:26
Very true. Very true. Well, that’s why I have this podcast and I invite people like you do on bigger, better amazing things than myself, Chad, and you’ve done some incredible stuff. So thank you so much for the insights that you’ve shared with us today. Chad, where should people reach out to you if they want to learn more about Profasee? Where should they go?
Chad Rubin 53:47
They can check out profasee.com they can email me directly on my personal email, which is chad@profasee.com. I do post thoughts on LinkedIn. And I try to be vulnerable and open and share. So feel free to follow me on LinkedIn on Twitter. I’m here to support you and help you and achieve your goals. So thank you for having me on, Josh.
Josh Hadley 54:10
Awesome. Well, Chad, thanks again.
Outro 54:13
Thank you for listening. Visit ecommbreakthrough.com for more information. If you’ve enjoyed today’s episode, the best way you can show your appreciation is by clicking the subscribe button and quickly leaving a review. See you again next time.
