What I like about SaleHoo is that not all the dropship vendors are in China. [...] So there are actually a lot of vendors on there that can be found that are local to where you reside and not from China. Which removes a lot of the friction with dropshipping.

Steve Chou first got into eCommerce by selling personalized handkerchiefs for weddings with his wife. He talks about how he did everything from sourcing to inspecting the suppliers to expanding his empire, and what key turning points made him get into the 7-figure club. Steve also talks about what he thinks of dropshipping, what really makes you money in the long run, and how he successfully built his eCommerce businesses from scratch. Read the interview below to learn more about his eCommerce journey.

The road to 7 figures

Sean: Hey everyone, it's Sean again from SaleHoo. In today's video, we get to interview Steve. He's a seven-figure business owner who runs multiple eCommerce stores, and he's going to share with us his insights on how you guys can grow your eCommerce stores. So, the first question I want to ask is: Steve, can you give us a bit of background on your eCommerce journey?

Steve Chou: Yeah, so we sell handkerchiefs and linens. Handkerchiefs might sound a little random, and the reason we came up with that idea was back when my wife and I got married.

We paid all this money for photography, and my wife, she cries a lot, you know, especially when she's happy and whatnot. So, we looked all over the place for handkerchiefs, but couldn't find them anywhere except for this factory in China.

And so, what we ended up doing was we imported a bunch, used maybe six or a handful of them, and then sold the rest on eBay. They ended up selling like hotcakes. So, fast forward three years later, my wife became pregnant with our first child, and she just wanted to quit her job.

Steve: Right, and where we live, it's really expensive. You need two jobs to get a good house and a good school district. And, you know, we wanted to start a business. Then we remembered when we bought those handkerchiefs, got back in touch with that factory, ordered a bunch, and we launched our store, which is called Bumblebee Linens.

Sean: Right, and how does that do?

Steve: I ended up making a hundred thousand dollars, over a hundred thousand dollars in profits in our first year, and it's grown in the double and triple digits ever since back in 2007.

Sean: Oh, that's awesome! Then did you start any other stores apart from that one?

Steve: Yeah, so we've encouraged our kids to start their own stores. So, they've started a couple on their own. Over a kid, in charge, and Reno B.

Sean: Oh, awesome! That's great.

Steve: And, for the most part, I help a bunch of students. I have a class of over 5000 students where I help them with their eCommerce stores. So, you know, I kind of treat them like my own, in a way.

Biggest successes and setbacks

Sean: Regarding your biggest successes and biggest setbacks, could you tell us about that? What were your biggest successes? What were your biggest setbacks in getting to that 7-figure level?

Steve: I think our biggest successes have revolved around getting repeat business and getting our existing customer base to continue to buy. Now, you might think that people don't get married that often (we sell things in the wedding industry), but we actually also found a group of people that are really into our products, and they buy from us regularly, namely event and wedding planners.

Steve: And I would say that in business, far too few people focus on their existing customers, and they're always out to chase brand new customers. So, if you have a really solid infrastructure in place to retain and get customers to return, you can easily grow your business because you're establishing a foundation.

Sean: Right.

Steve: I would say that the hardest part for us, in the beginning, was probably quality control from our vendors. We would haggle on price, get a lower price, and then find that our vendors would ship us products that were lower quality.

So, part of the learning process for us early on was learning that we need to hire an inspector to go inspect the merchandise or putting together very strict documentation on exactly what we wanted because anything that you don't document is pretty much up to interpretation by a supplier.

Sean: Could you tell us more about that quality control inspections?

Steve: Okay, yeah. So, there's a whole bunch that you can use. So, we actually have a dedicated person now, but before, we used to use a service called "Qima." They'll literally send someone to the factory as your products are being made and inspect them off the line, a statistical sampling off the line, and it's not that expensive.

It's like two or three hundred bucks. So, that way, before it's shipped to you, you can make sure that at least statistically, your products are good. Now, today, we actually have our own warehouse here in the United States.

We don't use a 3PL. We have everything shipped there, and then from there, we fulfill orders ourselves for our online store as well as Amazon.

When did you become profitable?

Sean: The next question I have is, what is the tipping point when you really pulled through? So, like, was there a point in the journey where you were basically unprofitable for some time, and then you realized that after this point, you really pulled through and became profitable?

Steve: We were profitable right off the bat because we ran it out of our house.

Sean: Okay.

Steve: So, we literally had no expenses. This is back before Amazon when we got started, by the way. So, hosting was seven dollars a month, and I think credit card processing was thirty dollars. And I think all told, our expenses were around 50 a month.

Sean: Right, wow.

Steve: We made our first sale, I think, about two or three weeks later after we had launched. And this is what most people don't understand: all you really need is, like, one good traffic source to hit six figures, and you probably need two or three to hit over a million bucks, right? So, for us, that early traffic source was Google AdWords.

Steve: I learned that platform, got it down really well, and that was enough to just take us to six figures on its own. We also had, like, we had three prongs, basically.

So, one was paid advertising, and Facebook wasn't even around back then when we got started. The second prong is content creation. So, by creating content that ranks in the search engines, you can deliver free traffic to your site.

So, that was another third. And then the final prong was reaching out to our biggest customers and getting them to buy over and over and over again. In our case, those were wedding planners and event planners.

Is dropshipping feasible long term?

Sean: Do you teach dropshipping or have you done dropshipping?

Steve: You mean, yeah, we dropshipped a little bit early on. And I know this is what your company does, providing dropshipping vendors. But I'm actually not a fan of dropshipping in the long term. Dropshipping is really good for getting started on a low budget, where you can test the market for products and see what sells.

But then, it's always to your advantage to take those popular dropshipping items that you sell and then private label those and keep more of the profit because the margins for dropshipping are lower, obviously than if you own your own brand and product.

Sean: Definitely. Yeah, actually, that's what we're also starting to advocate at SaleHoo. Because we have two products. We have SaleHoo, which provides dropshipping, and then we have the SaleHoo Directory, which has wholesalers and manufacturers. And that allows people to transition from dropshipping to wholesale and do private labeling. Because we don't advocate for people to do dropshipping long-term. We only advocate it to be a way for them to test the market.

Steve: What I like about SaleHoo is that not all the dropship vendors are in China. And in fact, I believe your company was established in Europe.

Sean: New Zealand.

Steve: New Zealand, I'm sorry, New Zealand. Right, so there are actually a lot of vendors on there that can be found that are local to where you reside and not from China. Which removes a lot of the friction with dropshipping.

Should you buy wholesale starting off?

Sean: Do you basically teach your students to also buy wholesale right off the bat?

Steve: Well, it just depends on what their budget is, right? Everyone has different starting budgets. So, if you have no money, then I always say, "Hey, you can start dropshipping or affiliate marketing or print on demand or whatnot to get a feel for the waters and figure out what sells." Like, if you have no idea. And then, you know, progress to private labeling.

It's like a progressive process. If you have very low money, the progression is dropshipping, buying wholesale, and then finally private labeling. Because private labeling requires the most amount of money, while wholesale doesn't require that much money, so it's a good stepping stone.

Sean: But what if you only had five hundred dollars? What would you do?

Steve: With 500 bucks, I would probably do dropshipping or affiliate marketing and focus on content creation in the beginning.

Sean: Right. And if you had, let's say, a larger budget like two thousand dollars?

Steve: I would say, with two to three thousand dollars, I would just start right off the bat with a private label product, a single private label product.

The problem with dropshipping

Sean: Do you believe in winning products? Or are all products potentially winners? In dropshipping, they have this thing called winning products, whereby if the product doesn't sell after running a bunch of tests with paid ads, then it's considered a loser. And if it does sell, then it's a winner. Do you believe in that, or is it basically…

Steve: Here's the problem with dropshipping, okay? Once you're selling other people's products, which means other people are selling the exact same product, it always leads to price erosion.

And I think dropshipping took a huge hit when Amazon came out back in the day. Dropshipping was popular among brands because you could instantly get a sales force, other people selling your products, and you handle the fulfillment. It's like selling wholesale, almost as a brand owner.

Today, Amazon owns over 50% of eCommerce. So, why should a brand depend on other dropshippers? A brand can just outsource all that to Amazon and not have to do their own fulfillment.

Sean: Right, yeah.

Steve: So, I would say the most successful long-term dropshippers that I'm in contact with, who make a lot of money, are those drop-shippers that sell kind of like the higher-ticket items.

We're talking about barbecue pits or larger items that you wouldn't think to buy on Amazon or whatnot. So, you're correct. There is a class of dropshippers that run ads to see if something sells. But I can almost guarantee you that the product is not going to have longevity.

How did you choose your market and product?

Sean: And how did you decide that you basically wanted to target that market? And how did you also decide what product to sell to that market?

Steve: Well, the reason why we decided to sell our products is because it was a problem that we had.

Sean: Oh, right, right.

Steve: And then, by going on the wedding forums all the time, I found that there was actually a lot of demand for these types of products because, you know, when people get married, they want keepsakes of their wedding.

Sean: Right.

Steve: So, we kind of went in, knowing that it was going to sell because we had validated the idea on the forums, and we ourselves had that exact same problem.

Sean: Interesting. And do you advocate for your students to focus on trending products or do the same thing you did, which is to focus on a problem they personally had?

Steve: It's always best to focus on a problem that you have or something where you have your own expertise. It always pays to sell something where you have some sort of unfair advantage, whether that be contacts within the industry, knowledge about how things work, or just an itch that you need to scratch.

I think the problem with trending items is that by the time you see it trending, it's probably already too late, and a whole bunch of other people are probably jumping in at the same time. So, I actually advise the opposite. I say, stay away from those trends because often times, those fads don't last that long either.

Top marketing channels

Sean: In terms of marketing your store to the level it's at, what were the most useful things you did specifically? Let's say if we focus on Google Ads because you mentioned that first.

Steve: Yeah, so again, it just depends on what you sell. If your product has good search intent, then Google Ads generally will do pretty well. Of course, it depends on how competitive your keywords are and such. If your product does not have good search intent, then Facebook and Instagram ads will tend to perform pretty well.

And right now, those are the two main platforms. And if you want to talk about Amazon, that's another story in itself. Advertising on Amazon, listing your stuff on Amazon. Amazon owns over 50% of eCommerce, so I would say you probably should be on Amazon. But again, it depends on what you sell and how competitive those keywords are.

Sean: Right. What do you think about organic marketing, especially with TikTok marketing around? I've seen merchants not even spend on any ads; they just market their content organically.

Steve: Absolutely. Like, this is why we did content. We chose blogging. I mean, you have one of three choices: blogging, YouTube—I generally don't recommend podcasting—and social media like TikTok marketing, Instagram Reels, and YouTube Shorts.

Sean: Right.

Steve: In the very beginning, you've got to just pick one, whatever you're good at. We just happened to be good at blogging, that's why we went that way.

Sean: Right.

Steve: But you are right, lots of people make money off of YouTube. My buddy Eric Bandholz of Beardbrand, his entire business is generated from YouTube. Right, long videos on YouTube. There's another acquaintance of mine who sells swords, and he makes all this money, I think over 10 million bucks, just on TikTok.

Sean: Oh, wow.

Steve: You just gotta pick your... pick your medium and go with it.

Sean: Right. What are some guidelines you would advise beginners in terms of choosing which marketing channels they should go for?

Steve: Well, the first thing is, don't try to do all of them. Just pick one and be good at it. And it really just depends on your personality. Like, if you like to write and you're good at analytical stuff related to writing, then start a blog. If you are good on camera or you don't mind being on camera, I would say YouTube or TikTok. TikTok marketing probably like the lowest barrier to entry.

Sean: Yeah.

Steve: Right now, the future of TikTok marketing is a little up in the air. Who knows what's going on with the legislation here? Who knows, it might get banned in the US. I don't know.

Steve market validation methods

Sean: And what type of experiments did you run when doing your marketing? Like, what contests did you run to tell if the market is very receptive to your product or not?

Steve: Yeah, as soon as we started running AdWords, we started making sales. That's like the easiest validation there is. Now, if you don't want to do it that way, you can just go on forums like the wedding forums, as I mentioned earlier. You can go on and just gauge.

All you gotta do is just go on there and say, "Hey, I'm looking for this particular product. Does anyone know where I can get these from?" And then people respond, you thank them, and you can say, "Oh, hey, I actually found a place. I ended up buying a bunch, but I have a couple extras if anyone wants them at a really cheap cost. Contact me."

Sean: Right.

Steve: And then, if people are contacting me, that means that's just like a quick and dirty way of engaging in demand.

Sean: Okay.

Steve: Yeah.

The future of eCommerce

Sean: So, just the last question, Steve. How do you think eCommerce as a whole will change in the next one to two years? And do you have any advice to adapt to this change?

Steve: So, this has already been happening for the last several years, but in order to survive, I think you pretty much have to have your own brand in the long run. Mainly, it's Amazon that's driving this. I would say selling on other people's platforms is just getting harder and harder, and the only way to have full control over everything really is to have your own brand.

And the customers and the community that you create are very important. This is why services like email marketing, SMS, holding challenges, and that sort of thing are so important to build a community of rabid fans for your brand.

Sean: Okay, thanks, Steve, for taking the time to hop on this call and giving all this value to our audience.

Steve: All right, hey, thanks for having me on, Sean.

Sean: Awesome, all right.