We have come a long way since our first post (6 months ago), here!
I plan to continue updating our progress every 6 months, highlighting our mistakes and our hits in hopes your can utilize some ideas to help your ecommerce and the difficult business that is fresh (24 hours) perishable shipping.
Who we are: http://ift.tt/2tNACFvin 1985 my Dad and Uncle started the Maryland Seafood business and today it does $20 million in gross revenue each year. We sell raw and cooked seafood, and prepared dishes at 14 locations — 11 storefronts and three trucks — We have over 1,000,000 customers in the Baltimore-Washington-Philadelphia market. On June 24th 2017 my cousin and I started the nationwide home shipping business as a separate entity. The operation is run by me, my wife, dad, uncle, brother, cousin and 60 employees. I have no ownership in the stores, food trucks, and franchises. My uncle owns and handles all that.
My Background: the business was named after me in 1985 as I am the oldest son of 6 children. My main business is apartment brokerage and investing. I have been a MD, DC, and VA broker for 17 years www.idealrealty.com. I sell 100+ unit complexes to institutions and high net-worth individuals.
Coolest Online Customers: Gilbert Arenas and Mia Khalifa
What seafood do we sell online: Virtually everything but, 85% of sales are Maryland crabs, Maryland crab cakes, Maryland crab soups, and Free shipping samplers.
What we do: we ship freshly cooked Maryland Blue Crabs, Crab cakes and seafood to your door in 24 hours after being caught in the Chesapeake Bay, Maryland. We send you seafood that is 3 days fresher than the grocery store. Btw, we accept bitcoin!
Where do we get our Seafood? Chesapeake Bay, Maryland for Maryland products, using our own crabbers and contracted crabbers over the past 32 years. Although our COGS is 30%, shipping with 1-2 day delivery is very expensive, with the packaging materials outweighing the FedEx fees. We ship it fresh with Snow/King crab legs, soft shells (in off-season) and lobster tails being the items we ship frozen. Some items we receive frozen like Bee Gee shrimp from Louisiana.
We are True Blue Certified, meaning In order to be True Blue certified, participating food service establishments commit that at least 75% of their annual crab usage will be from Maryland harvested or processed crabs.
Startup Leverage: We do have some amazing advantages and you should tab into yours: 1) We don’t pay rent because we operate out of my uncles seafood headquarters. 2) We don’t need employees to handle extra orders (my partners handles up to 50 orders a day by himself) because we can use our existing employees. 4) We don’t have “employees” we contract existing employees meaning you don’t have to pay 15% tax 3) We don’t have food spoilage because we buy only what we need from our the stores each morning.
Online Profit Margins: We aim for 35% gross margins with our cost of goods sold at 30%. However, packaging and shipping costs wipe out most of it while paid-advertisement has wiped out the rest leaving us with 10% gross for the first 6 months. 1) We eliminated AdWords since our ROI/customer acquisition costs were too high. 2) We reduced all packaging costs through trial and error. We eliminated anything not necessary then negotiated each material with three vendors. You need to create a bidding war. 3) We negotiated shipping rates by switching vendors 3x. We formed a strategic partnership to tab into their FedEx account. With a growing customer base we are on track to hit 30% gross next year but it’s possible to hit 40% and 10% net.
Free Shipping Model: We offer free shipping to 29 states (1-2 day zones through FedEx ground network) when a customer spends over $200. Since our average order is $160 we think that’s a solid minimum order. We offer flat-rate air shipping everywhere else. National shipping is $94.99 or $79.99 when they spend $200+. We offer many free shipping sampler combos to local and regional customers. It’s too expensive to ship nationally without ridiculous pricing. That’s ok, if we can capitalize on the 29 ground states we will hit our $20,000,000 number. We don’t make any money on shipping, and I wish we could. Shipping page.
Chargeback Fraud: people are creative and fraud has cost us thousands We cannot require signatures on shipments without incurring a $4.50 fee and what if the person isn’t home? FedEx will return the box to their hub subjecting it to transit issues and spoilage. A lot of our customers order our food as gifts so the billing and shipping don’t match. We learned you can get expensive software that charges a per transaction fee. It’s only worth if at higher volume but you can do your own fraud detection. For example, look up the shipping address in google maps. Google the person and look for articles about them to show they live in the state. Modify your payment processor’s security features so you can monitor the results. We noted most fraudsters order our frozen items (to store or resell them) so we carefully review each frozen order with wide eyes.
Losses: We have made many errors totaling $15,000. Shipping wrong items, missing items, item arrives late or spoiled, gel packs melt, things happen. The important thing is to address the root cause, which helped us lower our losses rate from 15% down to 5% with a 3% goal in mind for 2018.
Shipping – pin FedEx vs UPS and save money. Make sure the “rates” include a residential fee and fuel fees. Also know like new credit cards they will give you introductory rates that eventually run out and use your monthly sales volume to adjust up/down. Negotiate longer into rate periods if you can! UPS offers insurance on the entire sale and will grant 25% off next day air on any bad deliveries and charge $1.80 per $100 but there is a catch. Your customers need to provide you photo proofs, and UPS has to be at fault to receive a claim (late delivery which occurs less than 1%) or a forgetting to deliver. However, UPS has abysmal Saturday ground delivery networks as it’s new as of August 2017 when FedEx has the entire network open. UPS has a smaller ground delivery range that FedEx too. No brainer for us, we chose FedEx. We don’t take insurance because it’s a loss. This will depend on your line of business.
Packaging Perishables – we reverse engineered Blue Apron and competitors to figure out how to ship fresh (and live) seafood. It also teaches you where to find suppliers (use manufacturers not resellers as they have a markup). Call them and form relationships.
Gel Packs: It takes 5 weeks to properly freeze a gel pack! I thought our business was doomed when I learned this because how can I store that many gel packs and replenish them within my walk-in freezer? Solution: we pay for pre-frozen ones and have pallets stored at -10. We learned this from ordering from Blue Apron and calling the gel pack manufacturer.
Boxes: to ship perishable seafood you probably need an insulated cooler and corrugated box kit. Since we started, we reduced costs by 30% by searching for a manufacturer (not a distributor) that can cut costs and store surplus for us. Costs include freight so find someone local within 1-2 hours of your HQ.
Customer Service: We sell seafood but we are in the customer service business. We are open 7 days per week and either I or my brother will answer your phone calls (888-404-7454 x1). Our competitors are only open 5-days per week. We offer cash refunds and reshipments on any customer complaint. Our competitors may give you a credit on your next order…The customer is always right and we ensure 100% satisfaction guaranteed. This has converted customers to repeat customers. We treat each customer as we want to be treated. Give a little, get a lot.
Website: I know you think I am biased because my wife created our site from scratch but she did an amazing job for her first ecommerce site! We modify content daily and advertise to our email list once per week with discount codes. This would have cost me $10,000 to $30,000 with all the changes we have made. It’s constantly evolving and the project never ends. Find a good partner that will grow with you. No 3rd party will put in the passion a strategic partner could offer. Try offering a lower hourly rate but give them a piece of the action for the difference.
Advertising: The best advertisement for us has been word-of-mouth. We carry 5-star reviews on Facebook but getting satisfied customers to review is hard (after a sale they receive an email asking them to rate their experience). We thought about offering a coupon but it feels like a bribe. We do offer a coupon once someone abandons their cart to remarket. We send out weekly coupons via mailing list and we offer weekly storewide specials (the real savings happen when you sign up). Social media is free, get good at it. Learn which outlets suit your business. For us, Facebook and Instagram work whereas Twitter has no traction. I learned ads on social media don’t convert. Nobody wants to be spammed ads. They want to discuss a topic and engage on pictures, videos, and education about your field. They will find a way to buy from you. Instead of offering a coupon teach them a recipe, explain why a Maryland Crab is the world’s best crab (in the Chesapeake Bay, due to the specific climate, the Blue Crabs lie dormant for 6 months and form a layer of fat on their meat which gives them a their sweat buttery flavor!). You see, that’s interesting! When you post ask yourself how will this engage an audience? You want to advertise? Then try doing giveaways using www.gleam.io, which has amazing social networking tools to spread the word.
Facebook is another animal where most of our success has been through remarketing. Currently, we are brainstorming both organic and paid Facebook ideas…I’m open to any suggestions. Getting customers to your homepage is the hardest part. Once they get there, your site has to convert them. When we started, we used Adwords to bring attention to our product pages but we had no other supportive information to convert them. We recrafted each page to stand on its own (assuming they never leave that page) and doubled our conversion rates!
We outsource our SEO/AdWords to a company that we learned about through our first Reddit Post. SEO can take at least 6+ months to build up your keywords on the rankings list. You need to be on the 1st page or you won’t convert traffic. We started with most organic keyword rankings on the 64th page and are have almost all of our keywords now on the 3rd page. By February most of our keywords should be on the 1st page! Many things went into this including getting quality backlinks, blogging 6 times per month with SEO rich content, carefully titling each page, section, and product; and Keyword/URL optimization.
Adwords: We foolishly spent $42,000 on AdWords and ended our campaign with $37 cost per conversion and 186.29% ROI, which doesn’t allow us to make profit during the off-season (crabs are seasonal from April to November) so we will try again in Q2, 2018.
Influencers: overall this hasn’t been profitable. We have social media influencers with 100k+ dedicated seafood/food followers whereby we grant them a vanity link and discount but it hasn’t worked. We belong to several influencer networks were they receive 8% for posting banner adds, this has only brought in $10,000…
Mia Khalifa: We reached out to Mia as she has the strongest influences (4m+ followers) for a Maryland native that loves our seafood. We sent her food and she spent a week hyping the brand including social media posts, PMs and featured a Twitch episode about Cameron’s. Definitely drove tremendous traffic although we can only ship to the USA due the transit time lag of customs. We look forward to working more with her.
Gilbert Arenas: I’m a huge Gilbert and Wizards fan! He replied to Mia’s post and a PM worked to get his interest. He is a real character and orders a lot of our seafood each month. He love the high-protein variety that (Maryland) seafood provides. Chicken and vegetables does get boring.
Washington Post: We were featured in the Washington Post on Dec 1st, see here. They did a good job summarizing our business so far. We have also been featured in Forbes, New York Times, Huffington Post and more. How? I googled the food reviewer from each of the above and figured out their contact info. Sent them a 2-line email asking them to review our food and boom!
Videos We started sharing videos of the entire process so you can see the experience before you risk order fresh seafood online. We plan to continue posting new videos in 2018 and I’d love feedback on what you would like to see?
Resteam Maryland Crabs (gif recipe style)
2018 Goals
- Getting to 100+ orders a day without paid advertisement
- Wholesale crab cakes to home meal delivery providers (i.e. Blue Apron)
- Wholesale frozen crab cakes and soups to large retailers (i.e Costco) and Amazon
- Visit multiple tradeshows
Please provide us any feedback or ideas. We want to get better and need your help.
Discount code "holiday" will save you 10% on all order and we accept Bitcoin!
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