Thompson: JLD, yes I am.

Dumas: Yes! Bernie is the founder of Efficient Era, a software company that builds analyst tools for Amazon sellers. He is also the founder of Plugable Technologies, a multimillion dollar electronics brand selling on Amazon. Bernie is the author of Flywheels and Feedback Loops: A Guide to Success for Amazon Private-Label Sellers. I think it’s safe to say he is an Amazon guy. Bernie, take a minute, fill in the gaps for that intro, and give us a little glimpse of your life.

Thompson: Well, I’m a software engineer who actually started five companies. On the weekends, I love to escape here to the mountains and the beautiful pacific northwest. It’s a great contrast to the computer work we all do.

A bit about my two main businesses: the first is electronics brand that, as you say, sells on Amazon, called Plugable Technologies. Its grown every year since I first started it on 2009. The second is a company called Efficient Era, which took the software that we created to make Plugable successful, and it offers it to all Amazon sellers. When I started the business on Amazon, it was really just a way – Amazon to us was just a way for outsourcing sales, marketing logistics, so I could focus on what I care about, which was the products and the technology. I experimented with just one product at first. Did everything myself, from photography to technical support, to even the ugly world of tax filing.

One trick was how I got goods to Amazon. Goods would arrive here at the port of Seattle. I’d run a U-Haul, pick up the cases at the warehouse, and actually park that U-Haul on the side of the road and hop inside. I’d work inside the U-Haul for hours, labeling cases, and then driving that u-haul straight to UPS so that I had a virtual warehouse for a day and could get everything to Amazon without having to take a big lease.

Now a couple of years later, Plugable has grown into a company with over 100 products and more than 20 full-time staff right here in the Seattle area. I’ve focused on carefully picking the right people and empowering them to focus on what they believe is right. I’m really proud of a significant business that’s having an impact.

Dumas: Bernie, you’re obviously an Amazon guy. You’ve just identified this huge opportunity that, by the way, is only getting bigger, and you leveraged it, you focused on it, and you dominated it. What’s something that we don’t know about Amazon, that as entrepreneurs, we probably should know?

Thompson: You know, I think everyone in Fire Nation knows that you can build a business and achieve financial freedom, and then if you’re selling physical goods, Amazon is a really great way to do that. What people may not believe, which is really true, is that with the same skills and techniques, you can build a company that competes with everyone, including the big guys, on a global basis. I’d ask somebody who is the biggest, oldest, most respected company in your space? In my space, which is consumer electronics, USB, and Bluetooth devices, it was companies like Belkin and Logitech.

You can compete with these guys, you can do better. You have the advantage because you care. You lean from the start, because in digital manufacturing now, when you’re talking about physical goods, you can manage one unit, or 100 units, and you can get those done tomorrow or within a few weeks. One resource I point out is Proto Labs, which is a great US-based digital fabricator, if Fire Nation hasn’t been thinking too much about physical goods. Then you can scale up to the same global contract manufacturers that the big guys use.

You have the biggest retailer in the world, Amazon, who is willing to sell your products right now without having to sell them on it, without having to have a sales force and go beg and have them say no just because they don’t understand or believe. You can make better, faster decisions precisely because you’re small. There’s really never been a better time to build a small business, but I think the key thing is, there’s also never been a better time to scale a small business up to a much larger one, one that competes globally.

Dumas: So, I’ve created physical products, I have the freedom journal, I have the master journal, I get a manufacturer, and then I get them shipped to a distributor here in the US, but then I also send them to Amazon FBA as well, so I have those there. They both sell pretty equally, actually. This is very interesting that they seem to do similar sales on a day-to-day basis, whether it be my Shopify story or my Amazon store. Of course, all of my marketing is going to the Shopify store and so Amazon is doing all of this completely free, amazing marketing for me, with “what customers also bought” and “you may also like this.” I love all of that. It’s a huge benefit for my business.

You don’t know the inside workings of what I do, I totally understand that, but just a shot in the dark: what’s something that I’m probably not doing and other product owners like myself are probably not doing within Amazon that we should be doing?

Thompson: I think you face a tough choice. You were talking about splitting your traffic between Shopify and Amazon there. One thing about Amazon is, their search algorithms reward your past sales. It’s basically a momentum game. In fact, the book that you mentioned earlier that we just published this month, Flywheels and Feedback Loops. The flywheels part of that is basically as you build momentum on Amazon, it’s self-reinforcing. We’d love to diversify away from Amazon. There’s a lot of negatives on being highly-dependent on Amazon, especially for business in my space, where we have millions of dollars in inventory that we’re carrying at any given time.

There’s a lot that can go wrong with Amazon competitively. You know what? If we didn’t send all the traffic we could to Amazon, we would not be able to push our listings, push our aisings up to the top of their categories. Even though we sell on Walmart, even though we sell on New Egg, even though we distribute to distributors, we actually spend all of our energy sending our viewers, and we do a lot of content marketing on YouTube, to Amazon so that we can spin up that flywheel and then get those ancillary benefits of greater organic on the biggest shopping platform, at least in the United States, which is Amazon.

Dumas: Do you distribute your product outside of the USA?

Thompson: We do, yeah. We sell through distribution on not-online channels, but we also sell on Amazon Europe, Canada, Mexico, and Japan.

Dumas: That was one reason why I still have my Shopify store and drive a lot of traffic there. It’s because that’s how I distribute outside the USA. How are you able to make it so you can distribute to Canada, to Mexico, to Europe, even though you’re US-based? What process did you have to go through to make that happen?

Thompson: We have developed a lot of software to make it easy. We have the software that we’re now offering to others through our site, efficientera.com. Basically, we hook into the Amazon APIs and all the geographies, and allow you to do this once and have those apply to multiple geographies. We’re shipping our goods not just to the US FBA warehouses, but also to FBA warehouses in Europe, in Japan, in Canada.

Also, there are programs where – in the Amazon Global Program, which allows people say in some of the uncovered geographies like, say, Singapore or Indonesia. They can order off amazon.com, and for extra shipping, Amazon will actually ship those items from an US FBA warehouse to somebody in Singapore.

Dumas: Do you have to actually have a business set up in one of those countries if you’re going to be sending them products to Japan and Mexico and Canada?

Thompson: Yeah, it varies per country. In Europe, you don’t. We’re that registered in several countries, but we do not actually have to have a corporation with tax returns. It’s the same thing with Canada. With Mexico, you actually have to have a corporation if you’re going to hold goods at the FBA warehouse there. Actually, Mexico is an exception to what I was saying there. We’re actually shipping goods right now from the US for Mexican orders and the reason is just what you were talking about. We don’t want to have to set up a company in Mexico.

Dumas: So, how do you get that registered?

Thompson: It’s tricky. It’s too long to cover in a podcast. Basically, the UK in particular offers a waive for nonentities to register with the UK government. We’re now filing with them on a monthly basis. We use a consulting firm in Europe to do that. It’s definitely an involved process. I think you probably need a few thousands or tens of thousands in sales before it becomes worth it. You don’t need to register in all the European countries until you cross what is called distance-selling thresholds, which are usually between 30,000-100,000 euros, but you do need to be registered in at least one European country to get your goods in the first place.

Dumas: That was going to be my next question, which obviously for you it’s a “yes,” but how do you manage the profits margins on these things? Because obviously, you need to be very competitive when it comes to how much you’re selling a product for. That’s how you’re going to raise your aising. But if you’re paying that and you’re having to register this, and you’re paying shipping charges to get your products over to the actual Europe and other distribution centers. How do you keep those profit margins in order?

Thompson: We model everything before we do it. We basically have spreadsheets where we try to break down all of the pro-order and product costs. We try to take some of those big, upfront costs and advertise it across what we expect will be the number of orders. Basically, you got to do that and it’s financial modeling.

Dumas: So, Fire Nation, Bernie sounds like he has it all together, and in a lot of areas, he does. But at the same time, he’s an entrepreneur. At the same time, he’s a human being. He’s had his ups, he’s had his downs. That’s where we’re going right now. Bernie, what is your worst entrepreneurial moment to date? Take us to that moment. Tell us that story.

Thompson: Oh man. We were doing great on Amazon and generally as an electronics business from 2009 to 2013. We were expanding fast every year. We were doing great with the products. We were early with Amazon. Up to that point, our top-selling product was a top-selling product for a really big category on Amazon: USB hubs. These are the things that let you plug in a device to get a lot more ports in your computer. It was kind of a perfect match for our Plugable brand.

Well, then one morning in late 2013, a bomb dropped on us. Amazon had just launched a line of USB hubs under their own brand, Amazon Basics. I’m sure everyone on Fire Nation knows that brand. They had actually sourced them from our supplier, competing with us directly. So, I saw this happen. I called the supplier that day. They were surprised that I’d even recognized that it happened. They apologized, they made some excuses, but the fact was, they were not going to pass up business from Amazon obviously. The very platform that we were selling on was now our biggest competitor.

They had fundamental brand and pricing advantages on us. We knew that our top-selling product now was at risk. In fact, for the next months, sales plummeted by 50 percent on that product. That was our top seller. That was my worst moment. We knew we couldn’t face Amazon head-on there. We had to be nimble, we had to be lean, we had to find a way to recover. We had to stay in the game, but focus our energy away from direct competition. I mean, sometimes when you’re faced with Goliath, you don’t face them head-on. We did what we knew we had to do. We diversified. We made sure that we had as much feature and price separation from Amazon as possible.

Because of that diversification that we actually had already built because we had a substantial product line at that point, we were actually able to grow even that year, where we took a huge drop on our top-seller, and every year since. We track Amazon’s house brands closely. We avoid them. Granted, USB hubs, which were our top sellers at that worst moment, which previously the best moment, are now no longer our top sellers. But other products that are more technically challenging or novel have taken their placed. We learned that we can’t beat the house, but we can live alongside them as long as we’re nimble enough.

Dumas: Now, not to scare our Fire Nation away from Amazon because the opportunity’s massive, but isn’t this a trend you are a little afraid of? You’re a little worried that Amazon could eventually just come out and basically be offering everything for everything? At the same time, I’m just thinking there’s just so much stuff out there. There are so many things to niche down and this isn’t Amazon’s number one focus because they’re doing so many other things, too. So, what are your thoughts on all of that?

Thompson: Yeah, it’s absolutely true. I think Amazon Basics actually started right around the time we did. In 2009 is when Amazon launched the Amazon Basics brand and that’s when we launched. Our life cycle as a company has existed alongside them. They’ve gone from just a few dozen products in the first year to thousands of products under the Amazon Basics brand. If you look at, in any given category, the long tail of products, it is just a fact that Amazon is going to wait to see what floats to the top and then they’re going to take that head of the market away. They’re going to launch something under their private label brand that takes the market away.

I think it’s just healthy to recognize that reality and to say that we’ve got to be in middle of the long tail – maybe a little bit down the long tail, identifying new opportunities, identifying niches, making sure that we have feature and price differentiation. But to also know that if we have a runaway success, Amazon could walk in at any time and take that away from us.

Dumas: Bernie, what are you most fired up about today? I mean, your finger is on the pulse, you have this going on, you’ve got a lot of irons in the fire. What is the one thing you’re most excited about?

Thompson: When we started Plugable, it was really just all about that electronics company. We wanted to build a better device company, better products, better support. That costs money. That cost must be passed on to the price of the product. How can we invest more and be rewarded for it? We realized that Amazon costumer reviews were the only way. If we sold at a physical retailer like Best Buy, no one would know if the last costumer had a good or bad experience. But with Amazon, the reviews would reward the better product and better customer service.

Amazon made a lot of things awkward for sellers. They would notify us and give us contact information when negative reviews came in, for example, even though basic costumer service could help many of those customers who were putting up those negative reviews. They provided a way to email about orders, but they didn’t make it easy at the key point when the costumer’s looking to provide feedback.

So, we identified all those key interactions between the costumer and Amazon and us and the product, and it’s kind of a multidirectional thing. We define processes as to close those feedback loops; identify them, respond quickly. To turn positive experience into positive reviews, and to turn around negative experiences. To achieve that, we had to write to a lot of software automation to gather data from Amazon, detect events, send out automatic emails. As we expanded globally and expanded to more parts of their selling process, that software was getting very expensive to maintain for just our branch, just one Amazon seller.

Obviously, what we have done was pretty amazing, and to just have it for ourselves was kind of a waste, even though it was our competitive advantage. I resisted for several years, thinking that the softwares are competitive advantage and I couldn’t give it away. My “aha” moment was the realization that we needed to offer our competitive advantage to all Amazon sellers so that we could continue to afford investing in what it’d become a pretty big piece of software. We created a new business, efficientera.com, to do this, and now, what I’m excited about is over a hundred companies use this daily to scale their season up on Amazon, and we’ve now got a second business alongside our electronics business that is scaling up and starting to have an impact, and it’s pretty exciting.

Dumas: Now, Fire Nation, if you’re excited about this, Bernie, where would they go?
Thompson: They can go on efficientera.com and it’s easy to sign up. We got a 60-day trial, so sending out emails in response to each order, identifying negative reviews, hooking those negative reviews up to which order they came from, proving sales charts, showing all your sales in historical context, alongside events that occurred on Amazon like price changes and title changes. All of that’s there, right on efficientera.com.

Dumas: Efficienera.com. Fire Nation, don’t go anywhere because Bernie’s going to be dropping value bombs in the lightning round right after we thank our sponsors. Bernie, are you prepared for the lightning rounds?

Thompson: Yes, I am.

Dumas: What was holding you back from becoming an entrepreneur?

Thompson: Well, really nothing. I started my first business at 23. I do think though that I did wait until I had a few stars aligned and I think that’s kind of a good thing. Basically, two, three, four kind of competitive advantages, something that I’m doing different with that business before I started, and I’ve kind of done that every time.

Dumas: What’s the best advice you’ve ever received?

Thompson: I think that’s probably lead by example. Once you’ve hired good people and established respect by your example, then another thing is probably that being nice is more effective than being tough. Harvard Business Review’s had some great articles over the year about the combination of those two things, leading by example and being a nice boss, is more effective than some of the other strategies.

Dumas: What’s a personal habit that contributes to your success?

Thompson: I use the Getting Things Done system by David Allen, which I’m sure tons of people in Fire Nation do the same. Either tackle it right away or get it on a prioritized list and get it out my brain. No need to worry about it.

Dumas: Can you share an internet source like Ebinnotes with Fire Nation?

Thompson: Probably another one that’s really familiar with Fire Nation, Trello. It’s a great tool for managing our to-dos at an intercompany level. For example, we have partnerships with the local university, and it’s just really easy to add people in the track work between the students’ professors and us via Trello.

Dumas: Nice. One more shout-out, Fire Nation: Bernie’s book, Flywheels and Feedback Loops: A Guide to Success for Amazon Private Label Sellers. On that note, Bernie, if you could recommend another book, what would it be and why?

Thompson: You know, I’d probably recommend Isaac Asimov’s Foundation trilogy. It’s kind of a fascinating prediction of the future. I think we can see some fascinating hints of it in the election that just happened. People are going to be very ding and manipulating our behavior kind of on-mass without us even knowing it, especially when you throw machine-learning into it. I think as entrepreneurs, we need to get in front of this and actually use some of these things for good, not evil.

Dumas: Yeah, so true. Bernie, we started on fire, brother, let’s end on fire with you giving us a parting piece of guidance, the best way we can connect with you, and then we’ll say goodbye

Thompson: We know that in today’s world, YouTube will teach us anything and use that. This podcast will teach you so much. Use that. Service providers can do so much to make little old you look like a business. So, get going, get big, and don’t let anything stop you. The best way to connect with me is just to email. I’m bernie@efficientera.com I have two gifts for Fire Nation. Are you ready to hear about those?

Dumas: It’s kind of nice having two companies. I get to give away two things. The first one is from Efficient Era and it’s a free chapter from the book you mentioned, Flywheels and Feedback Loops. You can get this chapter by going to efficientera.com/fire. The second one is for anyone who loves USB and Bluetooth gadgets. It’s an Amazon discount code for four of our items, Bluetooth headsets, USB chargers, and you can get the code at plugable.com/fire.

Dumas: Wow, Fire Nation. We need this stuff. This is stuff that we need, and you’re the average of the five people we spend the most time with. You’ve been handing out with BT and JLD today, so keep up the head and head over to eofire.com and just type Bernie in the search bar. His “shown as” page is going to pop up with everything we have been chatting about today. These are the best show notes in the biz. There are timestamps, there are links galore, and one more time, those links to check out are efficientera.com/fire for a snapshot of Bernie’s book. You can email Bernie if you have a question, you wanted to say thank you, you wanted to say hi, bernie@efficientera.com. If you want that promo code for those great things at Amazon, plugable.com/fire. Did I get that one right, Bernie?

Thompson: You did. Plugables is spelled with one “g.”

Dumas: Oh. Plugables, with one “g,”.com/fire and we’ll link it up in the show, Fire Nation. Bernie, thank you for sharing your journey with Fire Nation today. For that, we salute you and we’ll catch you on the flipside.

Thompson: Thanks so much, JLD.

[End of Audio]

Duration: 22 minutes
Thompson: JLD, yes I am.

Dumas: Yes! Bernie is the founder of Efficient Era, a software company that builds analyst tools for Amazon sellers. He is also the founder of Plugable Technologies, a multimillion dollar electronics brand selling on Amazon. Bernie is the author of Flywheels and Feedback Loops: A Guide to Success for Amazon Private-Label Sellers. I think it’s safe to say he is an Amazon guy. Bernie, take a minute, fill in the gaps for that intro, and give us a little glimpse of your life.

Thompson: Well, I’m a software engineer who actually started five companies. On the weekends, I love to escape here to the mountains and the beautiful pacific northwest. It’s a great contrast to the computer work we all do.

A bit about my two main businesses: the first is electronics brand that, as you say, sells on Amazon, called Plugable Technologies. Its grown every year since I first started it on 2009. The second is a company called Efficient Era, which took the software that we created to make Plugable successful, and it offers it to all Amazon sellers. When I started the business on Amazon, it was really just a way – Amazon to us was just a way for outsourcing sales, marketing logistics, so I could focus on what I care about, which was the products and the technology. I experimented with just one product at first. Did everything myself, from photography to technical support, to even the ugly world of tax filing.

One trick was how I got goods to Amazon. Goods would arrive here at the port of Seattle. I’d run a U-Haul, pick up the cases at the warehouse, and actually park that U-Haul on the side of the road and hop inside. I’d work inside the U-Haul for hours, labeling cases, and then driving that u-haul straight to UPS so that I had a virtual warehouse for a day and could get everything to Amazon without having to take a big lease.

Now a couple of years later, Plugable has grown into a company with over 100 products and more than 20 full-time staff right here in the Seattle area. I’ve focused on carefully picking the right people and empowering them to focus on what they believe is right. I’m really proud of a significant business that’s having an impact.

Dumas: Bernie, you’re obviously an Amazon guy. You’ve just identified this huge opportunity that, by the way, is only getting bigger, and you leveraged it, you focused on it, and you dominated it. What’s something that we don’t know about Amazon, that as entrepreneurs, we probably should know?

Thompson: You know, I think everyone in Fire Nation knows that you can build a business and achieve financial freedom, and then if you’re selling physical goods, Amazon is a really great way to do that. What people may not believe, which is really true, is that with the same skills and techniques, you can build a company that competes with everyone, including the big guys, on a global basis. I’d ask somebody who is the biggest, oldest, most respected company in your space? In my space, which is consumer electronics, USB, and Bluetooth devices, it was companies like Belkin and Logitech.

You can compete with these guys, you can do better. You have the advantage because you care. You lean from the start, because in digital manufacturing now, when you’re talking about physical goods, you can manage one unit, or 100 units, and you can get those done tomorrow or within a few weeks. One resource I point out is Proto Labs, which is a great US-based digital fabricator, if Fire Nation hasn’t been thinking too much about physical goods. Then you can scale up to the same global contract manufacturers that the big guys use.

You have the biggest retailer in the world, Amazon, who is willing to sell your products right now without having to sell them on it, without having to have a sales force and go beg and have them say no just because they don’t understand or believe. You can make better, faster decisions precisely because you’re small. There’s really never been a better time to build a small business, but I think the key thing is, there’s also never been a better time to scale a small business up to a much larger one, one that competes globally.

Dumas: So, I’ve created physical products, I have the freedom journal, I have the master journal, I get a manufacturer, and then I get them shipped to a distributor here in the US, but then I also send them to Amazon FBA as well, so I have those there. They both sell pretty equally, actually. This is very interesting that they seem to do similar sales on a day-to-day basis, whether it be my Shopify story or my Amazon store. Of course, all of my marketing is going to the Shopify store and so Amazon is doing all of this completely free, amazing marketing for me, with “what customers also bought” and “you may also like this.” I love all of that. It’s a huge benefit for my business.

You don’t know the inside workings of what I do, I totally understand that, but just a shot in the dark: what’s something that I’m probably not doing and other product owners like myself are probably not doing within Amazon that we should be doing?

Thompson: I think you face a tough choice. You were talking about splitting your traffic between Shopify and Amazon there. One thing about Amazon is, their search algorithms reward your past sales. It’s basically a momentum game. In fact, the book that you mentioned earlier that we just published this month, Flywheels and Feedback Loops. The flywheels part of that is basically as you build momentum on Amazon, it’s self-reinforcing. We’d love to diversify away from Amazon. There’s a lot of negatives on being highly-dependent on Amazon, especially for business in my space, where we have millions of dollars in inventory that we’re carrying at any given time.

There’s a lot that can go wrong with Amazon competitively. You know what? If we didn’t send all the traffic we could to Amazon, we would not be able to push our listings, push our aisings up to the top of their categories. Even though we sell on Walmart, even though we sell on New Egg, even though we distribute to distributors, we actually spend all of our energy sending our viewers, and we do a lot of content marketing on YouTube, to Amazon so that we can spin up that flywheel and then get those ancillary benefits of greater organic on the biggest shopping platform, at least in the United States, which is Amazon.

Dumas: Do you distribute your product outside of the USA?

Thompson: We do, yeah. We sell through distribution on not-online channels, but we also sell on Amazon Europe, Canada, Mexico, and Japan.

Dumas: That was one reason why I still have my Shopify store and drive a lot of traffic there. It’s because that’s how I distribute outside the USA. How are you able to make it so you can distribute to Canada, to Mexico, to Europe, even though you’re US-based? What process did you have to go through to make that happen?

Thompson: We have developed a lot of software to make it easy. We have the software that we’re now offering to others through our site, efficientera.com. Basically, we hook into the Amazon APIs and all the geographies, and allow you to do this once and have those apply to multiple geographies. We’re shipping our goods not just to the US FBA warehouses, but also to FBA warehouses in Europe, in Japan, in Canada.

Also, there are programs where – in the Amazon Global Program, which allows people say in some of the uncovered geographies like, say, Singapore or Indonesia. They can order off amazon.com, and for extra shipping, Amazon will actually ship those items from an US FBA warehouse to somebody in Singapore.

Dumas: Do you have to actually have a business set up in one of those countries if you’re going to be sending them products to Japan and Mexico and Canada?

Thompson: Yeah, it varies per country. In Europe, you don’t. We’re that registered in several countries, but we do not actually have to have a corporation with tax returns. It’s the same thing with Canada. With Mexico, you actually have to have a corporation if you’re going to hold goods at the FBA warehouse there. Actually, Mexico is an exception to what I was saying there. We’re actually shipping goods right now from the US for Mexican orders and the reason is just what you were talking about. We don’t want to have to set up a company in Mexico.

Dumas: So, how do you get that registered?

Thompson: It’s tricky. It’s too long to cover in a podcast. Basically, the UK in particular offers a waive for nonentities to register with the UK government. We’re now filing with them on a monthly basis. We use a consulting firm in Europe to do that. It’s definitely an involved process. I think you probably need a few thousands or tens of thousands in sales before it becomes worth it. You don’t need to register in all the European countries until you cross what is called distance-selling thresholds, which are usually between 30,000-100,000 euros, but you do need to be registered in at least one European country to get your goods in the first place.

Dumas: That was going to be my next question, which obviously for you it’s a “yes,” but how do you manage the profits margins on these things? Because obviously, you need to be very competitive when it comes to how much you’re selling a product for. That’s how you’re going to raise your aising. But if you’re paying that and you’re having to register this, and you’re paying shipping charges to get your products over to the actual Europe and other distribution centers. How do you keep those profit margins in order?

Thompson: We model everything before we do it. We basically have spreadsheets where we try to break down all of the pro-order and product costs. We try to take some of those big, upfront costs and advertise it across what we expect will be the number of orders. Basically, you got to do that and it’s financial modeling.

Dumas: So, Fire Nation, Bernie sounds like he has it all together, and in a lot of areas, he does. But at the same time, he’s an entrepreneur. At the same time, he’s a human being. He’s had his ups, he’s had his downs. That’s where we’re going right now. Bernie, what is your worst entrepreneurial moment to date? Take us to that moment. Tell us that story.

Thompson: Oh man. We were doing great on Amazon and generally as an electronics business from 2009 to 2013. We were expanding fast every year. We were doing great with the products. We were early with Amazon. Up to that point, our top-selling product was a top-selling product for a really big category on Amazon: USB hubs. These are the things that let you plug in a device to get a lot more ports in your computer. It was kind of a perfect match for our Plugable brand.

Well, then one morning in late 2013, a bomb dropped on us. Amazon had just launched a line of USB hubs under their own brand, Amazon Basics. I’m sure everyone on Fire Nation knows that brand. They had actually sourced them from our supplier, competing with us directly. So, I saw this happen. I called the supplier that day. They were surprised that I’d even recognized that it happened. They apologized, they made some excuses, but the fact was, they were not going to pass up business from Amazon obviously. The very platform that we were selling on was now our biggest competitor.

They had fundamental brand and pricing advantages on us. We knew that our top-selling product now was at risk. In fact, for the next months, sales plummeted by 50 percent on that product. That was our top seller. That was my worst moment. We knew we couldn’t face Amazon head-on there. We had to be nimble, we had to be lean, we had to find a way to recover. We had to stay in the game, but focus our energy away from direct competition. I mean, sometimes when you’re faced with Goliath, you don’t face them head-on. We did what we knew we had to do. We diversified. We made sure that we had as much feature and price separation from Amazon as possible.

Because of that diversification that we actually had already built because we had a substantial product line at that point, we were actually able to grow even that year, where we took a huge drop on our top-seller, and every year since. We track Amazon’s house brands closely. We avoid them. Granted, USB hubs, which were our top sellers at that worst moment, which previously the best moment, are now no longer our top sellers. But other products that are more technically challenging or novel have taken their placed. We learned that we can’t beat the house, but we can live alongside them as long as we’re nimble enough.

Dumas: Now, not to scare our Fire Nation away from Amazon because the opportunity’s massive, but isn’t this a trend you are a little afraid of? You’re a little worried that Amazon could eventually just come out and basically be offering everything for everything? At the same time, I’m just thinking there’s just so much stuff out there. There are so many things to niche down and this isn’t Amazon’s number one focus because they’re doing so many other things, too. So, what are your thoughts on all of that?

Thompson: Yeah, it’s absolutely true. I think Amazon Basics actually started right around the time we did. In 2009 is when Amazon launched the Amazon Basics brand and that’s when we launched. Our life cycle as a company has existed alongside them. They’ve gone from just a few dozen products in the first year to thousands of products under the Amazon Basics brand. If you look at, in any given category, the long tail of products, it is just a fact that Amazon is going to wait to see what floats to the top and then they’re going to take that head of the market away. They’re going to launch something under their private label brand that takes the market away.

I think it’s just healthy to recognize that reality and to say that we’ve got to be in middle of the long tail – maybe a little bit down the long tail, identifying new opportunities, identifying niches, making sure that we have feature and price differentiation. But to also know that if we have a runaway success, Amazon could walk in at any time and take that away from us.

Dumas: Bernie, what are you most fired up about today? I mean, your finger is on the pulse, you have this going on, you’ve got a lot of irons in the fire. What is the one thing you’re most excited about?

Thompson: When we started Plugable, it was really just all about that electronics company. We wanted to build a better device company, better products, better support. That costs money. That cost must be passed on to the price of the product. How can we invest more and be rewarded for it? We realized that Amazon costumer reviews were the only way. If we sold at a physical retailer like Best Buy, no one would know if the last costumer had a good or bad experience. But with Amazon, the reviews would reward the better product and better customer service.

Amazon made a lot of things awkward for sellers. They would notify us and give us contact information when negative reviews came in, for example, even though basic costumer service could help many of those customers who were putting up those negative reviews. They provided a way to email about orders, but they didn’t make it easy at the key point when the costumer’s looking to provide feedback.

So, we identified all those key interactions between the costumer and Amazon and us and the product, and it’s kind of a multidirectional thing. We define processes as to close those feedback loops; identify them, respond quickly. To turn positive experience into positive reviews, and to turn around negative experiences. To achieve that, we had to write to a lot of software automation to gather data from Amazon, detect events, send out automatic emails. As we expanded globally and expanded to more parts of their selling process, that software was getting very expensive to maintain for just our branch, just one Amazon seller.

Obviously, what we have done was pretty amazing, and to just have it for ourselves was kind of a waste, even though it was our competitive advantage. I resisted for several years, thinking that the softwares are competitive advantage and I couldn’t give it away. My “aha” moment was the realization that we needed to offer our competitive advantage to all Amazon sellers so that we could continue to afford investing in what it’d become a pretty big piece of software. We created a new business, efficientera.com, to do this, and now, what I’m excited about is over a hundred companies use this daily to scale their season up on Amazon, and we’ve now got a second business alongside our electronics business that is scaling up and starting to have an impact, and it’s pretty exciting.

Dumas: Now, Fire Nation, if you’re excited about this, Bernie, where would they go?
Thompson: They can go on efficientera.com and it’s easy to sign up. We got a 60-day trial, so sending out emails in response to each order, identifying negative reviews, hooking those negative reviews up to which order they came from, proving sales charts, showing all your sales in historical context, alongside events that occurred on Amazon like price changes and title changes. All of that’s there, right on efficientera.com.

Dumas: Efficienera.com. Fire Nation, don’t go anywhere because Bernie’s going to be dropping value bombs in the lightning round right after we thank our sponsors. Bernie, are you prepared for the lightning rounds?

Thompson: Yes, I am.

Dumas: What was holding you back from becoming an entrepreneur?

Thompson: Well, really nothing. I started my first business at 23. I do think though that I did wait until I had a few stars aligned and I think that’s kind of a good thing. Basically, two, three, four kind of competitive advantages, something that I’m doing different with that business before I started, and I’ve kind of done that every time.

Dumas: What’s the best advice you’ve ever received?

Thompson: I think that’s probably lead by example. Once you’ve hired good people and established respect by your example, then another thing is probably that being nice is more effective than being tough. Harvard Business Review’s had some great articles over the year about the combination of those two things, leading by example and being a nice boss, is more effective than some of the other strategies.

Dumas: What’s a personal habit that contributes to your success?

Thompson: I use the Getting Things Done system by David Allen, which I’m sure tons of people in Fire Nation do the same. Either tackle it right away or get it on a prioritized list and get it out my brain. No need to worry about it.

Dumas: Can you share an internet source like Ebinnotes with Fire Nation?

Thompson: Probably another one that’s really familiar with Fire Nation, Trello. It’s a great tool for managing our to-dos at an intercompany level. For example, we have partnerships with the local university, and it’s just really easy to add people in the track work between the students’ professors and us via Trello.

Dumas: Nice. One more shout-out, Fire Nation: Bernie’s book, Flywheels and Feedback Loops: A Guide to Success for Amazon Private Label Sellers. On that note, Bernie, if you could recommend another book, what would it be and why?

Thompson: You know, I’d probably recommend Isaac Asimov’s Foundation trilogy. It’s kind of a fascinating prediction of the future. I think we can see some fascinating hints of it in the election that just happened. People are going to be very ding and manipulating our behavior kind of on-mass without us even knowing it, especially when you throw machine-learning into it. I think as entrepreneurs, we need to get in front of this and actually use some of these things for good, not evil.

Dumas: Yeah, so true. Bernie, we started on fire, brother, let’s end on fire with you giving us a parting piece of guidance, the best way we can connect with you, and then we’ll say goodbye

Thompson: We know that in today’s world, YouTube will teach us anything and use that. This podcast will teach you so much. Use that. Service providers can do so much to make little old you look like a business. So, get going, get big, and don’t let anything stop you. The best way to connect with me is just to email. I’m bernie@efficientera.com I have two gifts for Fire Nation. Are you ready to hear about those?

Dumas: It’s kind of nice having two companies. I get to give away two things. The first one is from Efficient Era and it’s a free chapter from the book you mentioned, Flywheels and Feedback Loops. You can get this chapter by going to efficientera.com/fire. The second one is for anyone who loves USB and Bluetooth gadgets. It’s an Amazon discount code for four of our items, Bluetooth headsets, USB chargers, and you can get the code at plugable.com/fire.

Dumas: Wow, Fire Nation. We need this stuff. This is stuff that we need, and you’re the average of the five people we spend the most time with. You’ve been handing out with BT and JLD today, so keep up the head and head over to eofire.com and just type Bernie in the search bar. His “shown as” page is going to pop up with everything we have been chatting about today. These are the best show notes in the biz. There are timestamps, there are links galore, and one more time, those links to check out are efficientera.com/fire for a snapshot of Bernie’s book. You can email Bernie if you have a question, you wanted to say thank you, you wanted to say hi, bernie@efficientera.com. If you want that promo code for those great things at Amazon, plugable.com/fire. Did I get that one right, Bernie?

Thompson: You did. Plugables is spelled with one “g.”

Dumas: Oh. Plugables, with one “g,”.com/fire and we’ll link it up in the show, Fire Nation. Bernie, thank you for sharing your journey with Fire Nation today. For that, we salute you and we’ll catch you on the flipside.

Thompson: Thanks so much, JLD.