Few eBay sellers do so well with their business that they go on to open a bricks and mortar store. But Shaun O’Brien of Selby Acoustics, based in Melbourne, Australia, has opened two.
Few eBay sellers advertise anywhere outside their eBay listings, but Shaun does. He has sponsored racing cars – both real and virtual.
And few eBay sellers start their own private brand. But yes, you’ve guessed it, Shaun has two. And one goes by the unappealing name of Ugly Cable.
I caught up with Shaun to find out how he grew such a successful online business, ask why he started his bricks and mortar stores, and learn more about his branding strategy.
Andy: How did you get started selling online?
Shaun: I’ve worked in retail since I was 16 – I used to work at the local Kmart. I worked for them for probably 15 years, and then went to a place called Bunnings Warehouse which is a bit like America’s Home Depot. I worked for Bunnings for a long time.
I always wanted to have my own business but never had the money to start. Then eBay came along and started getting noticed in Australia around 2000 and 2001. I was sitting around with a friend and saying, “You know, an eBay store would be easy to start due to the low cost.”
Home theater was my hobby and I spent probably 6-12 months really researching eBay, looking into what was on there and what I could sell. It had been a dream to have a hi-fi store for years. To start up a hi-fi store you really want a million dollars for all the electronics and so on, so instead I thought I could sell TVs online. Two phone calls later, I realized no one was ever going to sell me TVs to sell on eBay. Back then eBay was a dirty word in the retail market in Australia – it was just seen as a junk market.
I looked around a bit more and I thought, “I’m going to be working full-time, I’m going to be running this business part-time, maybe accessories are the way to go?” I made a lot of calls and finally found one supplier that would sell me some accessories.
My wife would not let me invest any of our money into it, so my budget to start the business was just $100. I bought $100 worth of banana plugs, which are little plugs that go on the end of speaker cable. I put those on eBay and sold them, then invested all the profit back into new stock. I did that for 18 months, with cabling and similar stuff, working part-time while I was still at Bunnings. That was about the point when I could go into business full-time.
How did selling on eBay compare to your experience in traditional retail?
One of the things that I noticed from the start was that almost the only people selling on eBay were people who clearly hated their customers! It was 2003 when I put my first listing on eBay, and at the time every listing that I looked at was just totally anti-customer.
It was, “If you bid on my item you must pay in two days. We only ship once a week.” and so on. Every seller was just laying down rules and laws for their customers. With 20 years’ retail experience I knew that’s not how retail works. I looked at selling online just as retail on another venue, whereas everybody else seemed to think it was a way of getting away from their customers. I said to my friend who was a consultant on customer service, “I’m going to start this eBay store, and I’m going to have 100% positive feedback.” He said, “Yeah, you can, it will be easy!”
So I only focused on positive stuff. I said from day one that we’ll ship within 24 hours. Everyone else was shipping once a week. I didn’t include terms. I’ve never had terms and conditions in my eBay listings because I think they are just a list of reasons why we should not buy from that person. The terms are: you pay me; I’ll send it – it’s simple!
We got to 100,000 feedback before we got our first negative. Now we’re on 99.9%. Before I quit from Bunnings and went full-time, I used up all of my annual leave to see how much further I could take the business. I said to my wife, “I reckon if I do five weeks full-time I can easily double the sales”, which I did, and then I resigned pretty much straightaway.
Now we’ve got between 20 and 25 staff (including retail staff) and we do around 2,500 orders a week. We do 2,000 online, and the retail stores vary from 500 to 1,000 a week. Our wage bill at the moment is probably 12 to 13% of our turnover, which is a lot these days.
Have your eBay sales held up over the years, in the face of all the changes and increased competition?
The first four years we doubled sales every year, up to around four million, and then it started slowing down. We’ve been pretty stable at what we’re at now for the last three or four years.
The early years were gold. When I first started, on eBay Australia, there was just one guy selling AV cables. Now there’s 11,158 listings just for HDMI cables. There was no competition back then, and a cable with an RRP of $29 would sell for $80 with auctions. Now the competition is super fierce. Our eBay sales have actually been on a steady decline for the last two years, and it’s all competition driven.
eBay used to be somewhat a numbers game before Best Match came in. Best Match is a challenge to work with because nobody understands it. Clearly the top two results in search win 90% of the sales, so getting to the top is always a challenge. I used to run about four eBay stores. I was thinking that if there’s going to be competition, I might as well be my own competition. That went fairly well until eBay put a stop to it and really aggressively monitored multiple listings. It’s a tough environment now to continue at strong growth.
But the hardest thing I find with eBay these days, and it’s probably due the amount of SKUs that we have, is just the compliance. It’s change after change. Now they’re requiring UPCs and manufacturer part numbers for everything, and for the first three months we couldn’t get half the categories to update. We ended up changing everything to “Does Not Apply”, which hurts your rank. It’s going to take a staff member probably two or three weeks full-time to get it all fixed. We’ve been thinking about taking on another staff member full-time just to comply with eBay, which for me is just money down the drain. It shouldn’t be that difficult.
But we’ve diversified beyond eBay. We’ve got two websites, one being Selby Acoustics, and one being Ugly Cable. The sites are transactional, but it’s more about trying to grab brand. We import probably 75% of our volume, and we’re trying to move all of our brands to the same cable brand. Overall there’s two retail stores, two websites and two eBay stores.
Why did you start the bricks and mortar stores, and how do you attract customers there?
When I was running the business from home people continually asked to come and have a look at items, or to come and pick things up, and it wasn’t appropriate. So when I moved my stock out of home into my first warehouse in 2006, I just started saying yes. People would come there once, and then they would just keep coming back.
We dabbled for about 12 months with some radio and newspaper ads, but that really didn’t give us any benefit. Between eBay and our website, we’ve had no other marketing for any of the retail business – it was just driven through customer demand. At that time, we just had a little showroom tacked onto our warehouse. The second store in Geelong, which we’ve had for seven years, is only a small one with just two staff there.
Then as we grew we didn’t have enough space to have a store at the main warehouse in Hallam [Melbourne], so we moved around the corner. The new warehouse is quite large, around 10,000 square feet with four or five guys working there. We’ve had our big standalone store for nearly three years now.
What we found, and it’s the only reason we continue to invest in it, was that when customers come to the store, they spend five times as much. Online shopping’s hard for a consumer!
People walk into the store every day and they’ll look around and say, “Wow, you’ve got all this stuff, why don’t you have it all on your website?” We’ve actually got more on the website than we have in the store, but people have tunnel vision when they’re shopping online. If they’re looking for a teacup, they’ll find a teacup, they’ll order it, and it’ll turn up. Then they’ll say, “Where’s the saucer?” They didn’t think to look for a saucer at the same time. So then they go online and buy the saucer, maybe from the same guy or maybe from somebody else.
Online, people are tuned out to all the advertising and add-ons. They get so much spam in their inboxes, and pop-ups on websites, that they ignore it all. It’s really hard to show customers your whole offer online. We have salespeople in store, but they’re more customer service people. Customers walk in and say “I need one of those, then I’ll have that, I’ll grab this…”
Because all the traffic comes to the store from people who’ve seen the website, we don’t really get people walking in just to take a look. They’re coming to get something in particular, so our conversion rate in-store is about 98%. It’s almost unheard of for someone to come in and walk away, unless they’re looking at a $3,000 pair of speakers that they want to audition and then have a think about.
The retail stores also gave us legitimacy with suppliers to get a range of electronics. Now we do Epson and Optoma projectors, a lot of amplifiers and speakers, Onkyo and Yamaha, Sherwood, Q Acoustics from the UK, a good local Australian brand and so on. We offer pretty much everything to do a full system now.
What’s your AV setup like at home?
One of the dangers of making your hobby your job is that you get sick of the stuff!
We recently moved house and part of the deal on the old house was that all the home theater went with it. We had a beautiful system with eight seats, big screen and all that. At the new house I barely have a radio. It’s been 12 months and I just haven’t got around to setting anything up.
What software do you use to manage eBay and your online stores?
Because I started up with no capital and I was doing everything cheap, I was very slow to utilize third party tools, which I’m a total advocate for now. It retarded our growth a bit. We should have grown a lot quicker than we did.
We use Magento as an ecommerce platform and M2E Pro which is the connector to eBay. But we have a lot of trouble with it and have to keep on upgrading to the next version to fix problems. If you’re not a programmer, doing upgrades to Magento is bloody difficult – you have to rely on someone else to do it.
All the orders come into Magento, which is also our shopping cart for the websites, and we have a separate warehouse management system. The guys have scanners on their arms, so it’s all paperless and automated in the warehouse. In hindsight I would never have gone with Magento if I had known what it was going to be like.
Before Magento we used Marketworks [now discontinued] which was bought out by ChannelAdvisor years ago. The only reason we jumped ship and went to Magento was because they cut off all the support for Marketworks and wanted everyone to go to the full ChannelAdvisor product. The good thing with both ChannelAdvisor and Marketworks was that as soon as a change comes along they’re ahead of the game and get compatible with it.
I used Marketworks for eight years and we had maybe one bad downtime in all that time. Whereas with Magento it seems to be down every five minutes, and you’ve got to get a developer in to fix your website each time. It’s the worst possible solution for someone who’s not already a programmer, and I had absolutely no idea about that before we committed it. Now we’ve put probably AUD$200,000 into the website and Magento and it’s an expense every month just to keep it running.
They’ve released three security patches in the last three months, and we can’t even finish testing the last one when another security patch comes out and breaks all of the modules that are connected to it. You’ve either got to install the security patch and lose half your functionality, or risk not being patched until all the other modules release their patches. We’re still in the testing phase of the security patch that came out two months ago, and they’ve just released another new one last week!
How many SKUs do you have now? What sources do you use other than importing?
We’ve got 4,000 active SKUs at the moment, and around 1,200 waiting to be listed. That’s mainly due to a closeout deal – a supplier who was going to change the focus of their business and wanted to stop dealing with retailers. We bought all their stock – nearly 1,800 lines. It’s going to take quite some time to get through it all.
Probably a third of the clearance stock is going to be rubbish, and it will go to the tip [the dump]. It’s just obsolete – VHS cable and things like that. Then a lot of it is duplicates of products we already have, like HDMI cables. Probably 20% of it is range that we’ve never kept before, and some of it’s starting to sell quite well. We’ll use it as a bit of discovery for ongoing new lines. The supplier we were dealing with are moving towards a commercial focus rather than wholesale, but they have agreed to hand us off to their suppliers which is going to be great.
We’ve done just a few clearance deals like that – maybe one every few years. We don’t actively seek them out, it’s more when people come to us. We had one that was 400 pallets for 5% of the value. We’ve still got a lot of it but at that price you can afford to keep it for three years and still sell it.
Do you sell internationally?
For the first few years we were operating, international sales were probably 10% of our business, but we couldn’t maintain the service standard that we wanted to.
These days it’s far too expensive to ship internationally. What we found was that people were ordering and not realizing that they were ordering internationally, particularly Americans. We got too many complaints. I’m the first one to say that people don’t read the listings, and that’s what happened. We’ve got $20 items that cost $80 to ship to America. People would buy them then go to check out and have to pay $80 shipping, and they would think we were trying to scam them.
The products that did sell and ship well were things that are a bit harder to find, like specialized plates to go on the wall with little plugs. It was fascinating – we had items that might sell one every two months in Australia, but then we would sell six to different people in Italy in one week. You could really see a trend where someone’s found it then told all their friends, “Here, finally, this is where you get it from.” It would happen all the time!
If we were to ever consider international again we’d have another ID with a very limited range of SKUs. We’ve got products from the size of a pen through to a whole pallet, and a separate ID would allow us to be more targeted with shipping rates and policies.
What’s the strategy on your product range, and where do your own brands fit in?
From the start my goal was to be the Bunnings of home theater. Bunnings is Australia-wide so we work really hard on having a huge range of everything anyone could possibly want, and also anything anyone could possibly search for.
When I was buying wholesale, cables generally came in 1.5 meter, 3 meter and 6 meter lengths. I noticed people asking, “Do you have a 4 meter cable? Do you have it in 7 meters?” and so forth. As we started importing, we just ordered every length from one to 15 meters in every cable. If someone Googled “12 meter HDMI cable” we would come up. That was pretty successful, but now everyone is doing it.
Some of the conferences I’ve been to lately have started to indicate that that’s not the best idea any more. If you go to our website and look for a TV bracket, you get 50 results all to fit the same size TV. So if you start trimming your categories down and limit the choice it can be less confusing to buyers. I’ve started experimenting, and reducing some of the better selling categories to eight choices. We’re seeing some good results from that.
At the moment we have a Selby brand, and the Ugly Cable brand. Long term the budget choice will just be no-brand, and our house brand will be Ugly Cable. The way I see the future is Selby will be the retail brand and Ugly will be the product brand.
The advantage of your own brand is a better profit margin. With accessories, there is no well-known brand except Monster Cable, which is known as a rip-off. There’s high-end cables, but our market’s not the high-end blokes!
These days you can buy a HDMI cable for AUD$4 delivered, and postage costs AUD$2. In the entry to mid-level market, brand doesn’t matter for accessories, but for electronics I believe it still does. With brackets, for example, by and large it’s a hunk of steel, so what difference does it make if it’s $150 or if it’s $23? We focus more on the trust in the Selby name rather than the individual product brand name.
How do you market your business?
I consider eBay to be just an advertising medium really. For the revenue you get out of it, it’s an awful lot of work. Between eBay and our website, sales are about the same now but we sell twice as many items on eBay – it’s nowhere near as profitable. The website sells a higher value of items compared to eBay. People on eBay in general are searching for cheaper stuff, and that’s driven by eBay to a degree, because they promote cheaper stuff. It’s a self-fulfilling prophecy.
Other than eBay we spend about a couple of grand a month on Google AdWords. A company called Web Moves in America does our SEO. Now they also manage our AdWords campaigns, and our Magento store when it has problems.
I saw you sponsored a racing car, and have a virtual racing team too. Is that just for fun or a serious marketing strategy?
The real one was a guy called Simon Tabinor who was running a car in a national series here. We sponsored him for a couple of years. In the virtual world I do a lot of the online racing myself, and we are sponsoring a whole virtual series of 24-hour endurance races this year.
I’m into motor sport, predominantly Formula 1, and a friend got me into the online gaming. The Australian Endurance Series that we’ve started sponsoring probably has 600 people driving in it, between all the different drivers and teams. They broadcast it live on YouTube as well. It’s all going to have our branding on it now and they are all guys around 20 to 45 years old, which are our target market for both home theater and sim-racing.
It’s pretty hard to measure the results, but since we got announced as the sponsor I know we’ve had a few sales, because I’ve had people from the series contact me personally to ask about products. I think it’s good from a branding perspective – we get the selby.com.au URL out there without saying big things about what we do, just to try and generate awareness of the name.
What’s your best advice for new sellers?
For a start it’s important to really research the category that you’re thinking of going into first. I usually tell people to try what I did, something related to their hobby – or just one step away, or they won’t have that hobby anymore.
As far as starting a business on eBay, I usually say to them, “No, you’ve got to treat it as a business from day one.” Behave in the background like you’re a million-dollar business, if that’s what you want to be, instead of starting off like a guy that works from home.
But online you don’t need to portray yourself as too big, particularly on eBay. If you’re trying to have a good reputation for service, it’s very easy for a customer to leave bad feedback for a big corporation compared to one person. The more personal you are on eBay, the more likely the buyer will try and resolve a difference with you directly.
It’s hard for us to keep that smaller atmosphere about us. I think a little bit is due to eBay changes as well. These days we’re finding more and more people just leave bad feedback and are not prepared to talk to us about it. People shouldn’t get hung up about feedback, but use it as a measuring tool on how happy their customers are. If someone’s left us a negative and hasn’t contacted us at all about it, we’ll try to make them happy so they will buy from us again. Most other stores will go, “Well, if they’re going to leave me a negative like that, I don’t want them again.” You can keep saying that until you’ve got no customers left if you want!
From day one I approached it that I want to provide the same service experience as when people come into the shop. How do I do that online? Well, it’s harder, because it’s more difficult to convey emotion and humor in an email. If you say something to a customer as a joke in an email, they can take it as being offensive. So I usually say to people, “The best customer service online is no customer service. Explain everything clearly and have clear policies, but not too wordy. Be of an understanding that customers do not read stuff before they buy.”
You can jump up and down and say you have it written it in your listings as much as you like, but they’re not going to read it. If it’s so important, show it in a picture somehow.
Do you think eBay are heading in the right direction now?
I think they’re still struggling a bit. The latest changes they’ve made sound good. Let’s face it, as a seller I want them to be focused on me and what my needs are, but I also agree that they should be focused on getting more buyers. Quite often being focused on getting more buyers doesn’t equate to keeping the sellers happy.
If there’s more buyers coming to the platform then I’ll be happy, but let’s wait till April and see if they reverse it all. They haven’t had a good track record of being consistent over a long period of time, and they sometimes change things too quickly and don’t give it a chance to settle.
What are the big challenges for your business now, and what’s next for Selby Acoustics?
At the moment there are two big challenges – the Australian dollar is shocking, making it very difficult to maintain margin, and the competition is huge!
The other thing is that if you’re not doing free shipping you’re not in business. We’ve just been through another huge round of postal price increases in Australia.
We’ve had a lot of years of being very fortunate, and we’ve been at the top of the tree in our categories. But we’ve got some learning to do about doing things better and smarter. I’ve always been very black and white about eBay rules changes – if they change something we comply straightaway.
For example, they made a rule change 18 months ago that you weren’t allowed to add “graffiti” to your main images [additional text or graphics]. Interestingly enough I was one of the first people in Australia to start doing that. So once again we spent a month changing all of our images. But none of our competitors stopped doing it, and eBay are not policing it. They’ve actually almost given up because they can’t get their software to work. We did the right thing and we can see ourselves suffering financially for it.
Too many of our competitors use loopholes and bend the rules without consequence. So we’ve got to get better at being more competitive and smarter with our listing strategy. We won’t be adding new lines over the next 12 months because we’ve got enough of them to keep us busy, but we’re working on listing optimization and trying to get some eBay conversion rate back.
Shaun, thank you so much for taking the time to talk to me about your business, and I wish you the best of luck for the future.