PTM 010: Making Over $100K in 1 Year with an Online Store | Steve from MyWifeQuitHerJob.com

Welcome to the Part-Time Money Podcast, Episode 10: Making Extra Money with an Online Store. I am your host Philip Taylor, creator of PT Money Personal Finance.

Alright, today I am here with Steve Chou of MyWifeQuitHerJob.com. Steve I am familiar with, in the past I have had some interaction with, and I have really enjoyed his site, but I wanted to talk to him today about making part-time money. He and his wife started an online store a few years back, and she worked on the business part time while raising their first child. Steve worked on the site part time as well while maintaining his corporate career. From what I understand, they were able to bring in over $100,000 in revenue in their first year of business, and so obviously they were doing something right there. So, we are going to learn something today about setting up an online store and how you can get into that business.

Philip Taylor: So, Steve, welcome.

Steve Chou: Glad to be here, Phil.

Philip Taylor: So, what made you guys want to start making some part-time money?

Steve Chou: You know, it all dates back to when I proposed to my wife, and one of the things she said to me was, “You know, I want to marry you, but when we get married and when I get pregnant, I am going to quit my job so I can stay at home with the kids.” And I said, “You know, that’s perfectly cool. In fact, I would rather have a parent stay at home with the child than send the kid off to daycare.” So, we were married without children for about 3 years, and then all of a sudden my wife got pregnant. That is when I kind of started panicking a little bit because we live in the Silicone Valley, and the cost of living here is really high. My wife at the time was making $100,000 which is a pretty good salary. If she were to quit her job, we would have essentially lost almost half of our household income. So, that is what started the whole thing. Pretty much as soon as she became pregnant, we started researching ways that we could make money on the side. So, what we did was we kind of settled on an online store, something that my wife could run from the comforts of home while taking care of our child. And, we ended up putting it up while we were both working a full-time job. Within a year we managed to make over $100,000 in profit actually which pretty much supplanted my wife’s income. At that point pretty much once she took her maternity leave and got her yearly bonus, she quit her job. Now she pretty much runs the store at home. We have a couple workers come and help out, but essentially she only works a few hours every day, so it is perfect.

Philip Taylor: Wow, that’s a good set up. So, obviously I understand the need there, and it sounds like you were quickly able to replace that income. What was it about an online store specifically? You mentioned that was something she could do from home, but did you have any experience in running an online store? Did you have a friend who knew how to do it? What was sort of the driver behind that choice?

Steve Chou: So, I actually had no idea how to run an online store. I had no idea how to write any html code. I had no idea how to throw up a website.

Philip Taylor: Wow!

Steve Chou: But, when I was a kid I always wanted to run a store. I thought it was cool. Actually so did my wife. We were considering doing affiliate marketing and that sort of thing, but given our time frame I did not feel like we could make a significant amount of money within a year by the time she quit. I felt that selling physical goods was the way to go. It is not as passive as affiliate marketing, but there are a lot of benefits to having your own actual business. That is what made it attractive to us.

Philip Taylor: Okay. I see. Now, dialing it down a little bit deeper, what made you choose the niche of the store or the type of store that you chose?

Steve Chou: Oh, okay. It was actually my wife’s idea. She is really into weddings. Anything that has to do with a wedding, she reads. She still reads Brides magazine even though we have been married for a very long time now. So, I remember when we got married, she wanted to buy a handkerchief so that when she cried at the alter she would have something there to dry her tears. It turns out she searched everywhere, and she could not find handkerchiefs anywhere. So, what ended up happening was we ended up importing a batch of handkerchiefs just for our wedding. We purchased a bunch just so we could have 1 or 2 for the wedding and the bridesmaids and the bridal party. After that because they are so hard to find we decided just to sell these online. There turned out to be a market. That is probably one of our bestselling products today.

Philip Taylor: Awesome! So it is a handkerchief for women, right?

Steve Chou: Women and men actually, and you can actually embroider the bride, groom, and wedding date on it or the initials, so there is an amount of personalization involved as well.

Philip Taylor: Okay. I actually gave that gift to my groomsmen at my wedding as well.

Steve Chou: Oh really?

Philip Taylor: A handkerchief with, I think, the date and their initial or something like that.

Steve Chou: Yeah, it makes a really nice keepsake actually for your wedding.

Philip Taylor: It was kind of a classic gift too. Okay, so that is why you chose the specific niche. So, tell me about then the initial phases of what tools or resources online did you turn to to set up the site and manage the acceptance of credit cards and all this.

Steve Chou: Yeah, so back then actually there was not as much free software as there is today.

Philip Taylor: What year was that by the way?

Steve Chou: We launched the store officially in mid-2007. Back then there were a couple of big players, osCommerce, Zen Cart. Basically, I went into all this knowing that I was not going to be able to code the website myself. So, I started looking at free alternatives, and it turned out that there was a bunch of free open source shopping cart solutions out there.

Philip Taylor: Okay.

Steve Chou: So, the advantage of that obviously is it is free. They do not charge you any fees. You can run your store with as little overhead as possible. Pretty much the only thing you have to pay for is webhosting which is on the order of $5 to $7 a month.

Philip Taylor: Okay.

Steve Chou: So basically, I chose an open source package, read the forums, read as much documentation as I could, and just ran with it.

Philip Taylor: Alright.

Steve Chou: But today actually there are a ton of solutions available. Even if you do not know a lick of html, you can sign up for these hosted shopping cart solutions. They charge you a low monthly fee, and they pretty much handle everything for you.

Philip Taylor: Do you recommend that, or do you still recommend the open source solutions for more control maybe?

Steve Chou: Yeah, I always recommend open source if you are technically inclined because you have full control over everything. If you do not want to deal with any of the headaches of throwing up the technical aspects of the store, hosted solutions are perfectly fine as well. The only downside is you are essentially tied to that service because it is really hard to migrate.

Philip Taylor: I see. Okay. That is good stuff. So, what about the physical product? What were some of the initial products you had in the store? You mentioned the handkerchief. What were the other products, and how did you get them physically?

Steve Chou: We decided to just launch with a wide variety of handkerchiefs. I was told by some of my business school friends that it was better to be extremely specific when you are first launching. Essentially you want to be the best at what you do. So, we essentially started selling a whole wide variety of handkerchiefs, and we easily had the widest variety on the market. We decided to get these imported from overseas because the prices obviously are extremely attractive. That way we could screw up a little bit and still make a profit.

Philip Taylor: I see. Alright, so you actually had these shipped to your home?

Steve Chou: Yes, that is correct.

Philip Taylor: Then you would do some type of embroidery or just repackage it somehow?

Steve Chou: Yeah, it was either embroidery or we repackaged it. We essentially created bridal sets. Essentially it was repackaging I guess when it comes down to it. It is more like framing the product in a different light and marketing it as a wedding handkerchief specifically.

Philip Taylor: I gotcha. And as a package for all the bridesmaids or all the groomsmen? I like it! So embroidery, was that something you or your wife had some experience in?

Steve Chou: Yeah, it is actually one of my wife’s hobbies. It is not a hobby of hers anymore because of the business actually, but she is starting to get back into it now that we have outsourced that part of the operation.

Philip Taylor: But early on it was just her actually doing everything that went out, right?

Steve Chou: That is correct. That is correct.

Philip Taylor: So early on when did you find time? You mentioned you both kept your corporate jobs. She was just pregnant, so obviously there were 9 months there you had to work with, but when during your days, nights, or weekends did you make this happen?

Steve Chou: Mainly we did the bulk of our work on the weekends and on certain nights. We used to watch a lot of TV, and we pretty much stopped watching TV. When you do that, you find that you have a lot more free time. So, it was not actually that hard to find extra time because we were wasting a lot of it day to day before we decided to start this thing.

Philip Taylor: Now that you have kids, and I have kids now, we realize how much free time we actually had when we did not.

Steve Chou: Oh yeah, totally! Now it is like totally crazy!

Philip Taylor: Right! I know this happens a lot, but I think it is kind of rare that your wife would want to join in with you on this venture.

Steve Chou: It really was a joint venture because she wanted to quit her job, and it was a group effort to supplant her income. What worked well is there was a very thick dividing line between our responsibilities. She was in charge of product, and I was more in charge of the technical aspects, so we never really butted heads.

Philip Taylor: I see. Okay. Good. So you had the product, and you got the initial site up, so how are you getting people? You mention that you are very niche, which I think is good. You still had to get people to the site, so how did that happen in the initial stages?

Steve Chou: Yeah, so we relied heavily on AdWords.

Philip Taylor: Okay.

Steve Chou: And also forum marketing. We would comb the bridal forums and just start answering questions. Every now and then when someone would ask what an ideal keepsake would be, we would casually suggest our store. Meanwhile, in the background we were pumping out lots and lots of content for the website and slowly getting indexed in Google. Our strategy with the site was we would have these tutorials and craft ideas that you could do with your wedding. All of these tutorials used materials that we actually sold in our store. Customers would come in through the search engines, be really attracted to these crafts that they could make with their wedding, and then low and behold just click on the link and could just purchase it right then and there. We got a lot of our business that way too once we started getting indexed.

Philip Taylor: Okay. That’s great! So, it is almost a 3-fold strategy there where you have some social interaction through the forums, you have some direct advertising through AdWords, and then you have some SEO organic traffic coming from the tutorial content you are creating.

Steve Chou: There was actually 1 extra component as well in that we started contacting wedding and event planners who had the purchasing power to purchase in bulk. It was all those put together that allowed us to reach our profit goals for the year.

Philip Taylor: How did you pitch those planners? What exactly were those conversations like?

Steve Chou: It was essentially saying, “We sell wedding handkerchiefs. We are very reliable. We will deliver on time. You can pretty much inscribe your initials or whatever. If any of your clients ever need that service, we are available.” At the time we actually started expanding to selling napkins and linen towels and that sort of thing because honestly our prices were on par with rentals. At that point, if you are an event planner, sometimes it pays to spend a little bit extra and actually purchase your linens out right as opposed to just renting.

Philip Taylor: I see. That is good info right there you just gave me with sort of the 4 ways of building your business, 4 ways of getting traffic. In terms of any special skill set, you mentioned you really did not have much website experience, but it sounds like you had maybe some marketing experience or business experience in general.

Steve Chou: I am actually an electrical engineer during the day, but I actually do not do any software or web stuff at all. I am a hardware designer.

Philip Taylor: Alright.

Steve Chou: I am comfortable with technology, but I did not have the programming skills or anything like that. I had no idea where to begin. What is amazing now with the internet is you can pretty much learn via the forums, and there is a ton of tutorials online and books you can buy in the bookstore that can help you out if you actually are willing to learn the material yourself.

Philip Taylor: So, speaking of learning, what mistakes did you learn from along the way?

Steve Chou: Oh man! I learned a ton of things! Where do you want to start? On the technical aspects? On the customer aspects? Product sourcing? I mean, where do you want to start?

Philip Taylor: Let’s go with technical first.

Steve Chou: Technical, okay. So, I made a bunch of mistakes early on. Part of the fact was because I was too cheap. The first mistake that I made was I only accepted PayPal in the beginning because PayPal is free. You can put it on your site, and it is an easy way for people to check out. I do not know if you have noticed, but when you click on PayPal to check out, there is a really, really, teeny weeny link that you can click on to pay by credit card. What would happen was customers would try to check out, they would see that they required a PayPal account in order to check out, and then they would just leave. We actually lost a ton of customers that way early on because I was not really willing to pay for a real credit card processor.

Philip Taylor: I see.

Steve Chou: A couple of other things: AdWords – when you do not know what you are doing, you can throw away a ton of money. Early on when we were trying to figure out how everything worked, we blew through quite a bit of cash until we realized that you do not really want to be using broad match. You want to make your ads very, very focused and high converting. So, those are 2 of the major mistakes that we made early on.

Philip Taylor: Backing up to the PayPal issue, how did you figure out that that was a barrier to entry? Did you notice specifically?

Steve Chou: We were using Google Analytics, and there is a nice feature where you can set up a funnel. With this funnel you can tell how many people abandoned their shopping cart and at what stage of the process. We found that there was an unusually large percentage of bailing on the payment page. It was really suspicious because the percentage was way higher than the industry standard for shopping cart abandonment. That is when I did some research and found that we were making a mistake by just accepting PayPal and not credit cards directly.

Philip Taylor: Nice! And so going out and getting, I guess you would call it, a merchant account to be able to accept credit cards, what does that run you?

Steve Chou: It runs us about $30 a month plus fees.

Philip Taylor: Oh, that is not bad.

Steve Chou: It is not bad at all, not bad at all. Accepting credit cards is a little complicated because there are all these different pricing schemes. You can pay less up front and get a larger interest rate, or you can pay more in a monthly fee and get a lower rate. It really depends on what your volumes are. It is absolutely essential. Today 97% of our customers check out with a credit card and only the small fraction with PayPal.

Philip Taylor: I see. That is good. Let’s talk about product a little bit. Any mistakes you made early on there?

Steve Chou: We got all of our products from Asia, and it is really tricky because there is actually a cultural barrier when you are dealing with someone in Asia. You know I am Chinese, and we were dealing with Chinese vendors, but still it is just a different way of doing business there. In the beginning we tried to do everything remote through e-mail. We would get sent really crappy product. In the beginning when you ask for a sample, they send you something absolutely perfect, but when you end up buying in bulk, you get a bunch of junk. This went on with several vendors. Finally we decided just to hop on a plane and go visit all these vendors directly.

Philip Taylor: Wow!

Steve Chou: It was only after that and we had established a relationship that the product quality drastically improved. One of the mistakes I had was not anticipating the cultural differences. Doing face to face business with people in Asia is an absolute must.

Philip Taylor: I see. So, why not get product from the US?

Steve Chou: There are certainly advantages of getting the product in the US. The margins and the costs just are not there. For example, something might be 8x cheaper to get from Asia – the exact same product.

Philip Taylor: Wow!

Steve Chou: A lot of times the people in the US are just importing from Asia and then going through the product and doing the quality control for you, and you have to pay a premium for that. The other reason also is when you go overseas, there is a lot of product that you simply just cannot get in the US. That gives you a leg up because if it is not readily available, you have an advantage. Plus, it takes some time to import which gives you an even more competitive advantage from anyone wanting to try to enter your market.

Philip Taylor: How soon after you started the business did you jump on the plane to go to China?

Steve Chou: It was before the kids popped out. I am trying to remember now. It was so long ago.

Philip Taylor: Maybe 6 months in or something?

Steve Chou: It was sooner than that actually. It was probably after our second or third shipment of linens. We have relatives there, so we decided to make a vacation out of it, so it was not too bad.

Philip Taylor: Nice. Okay. So, obviously by that point you sort of had the feeling that this could do something, this business could make something. Tell me about that process of realizing. I understand the motivations you guys had early on, but tell me about the process of realizing, “Hey. This is something that is really going to take off for us!”

Steve Chou: You know, it is funny. It started out very slow early on. It got to the point where I was stalking our customers. One of the features of our shopping cart is you can see exactly where the customer is and where they are looking. I would just sit there and watch them go through our store, through checkout, and then they would abandon our cart, and I would go nuts. After we got a couple orders under our belt, I started thinking to myself, “You know, this isn’t so bad. People are actually buying from us.” We made a ton of mistakes with the website in terms of conversions and optimizing the store to address any anxiety that a customer had during checkout. Once we got those issues out of the way, orders started coming in on a regular basis. After a while we were like, “Wow! This is going somewhere!” We also adopted another strategy which worked out really well for us – we wanted to have the absolute best customer service possible. We would go out of our way to cater to our customers. As you know, brides when they are planning their wedding tend to get a little bit emotional sometimes.

Philip Taylor: Sure.

Steve Chou: It is all about addressing these concerns and going out of your way to please them. Then, they will talk. They will recommend you to their friends and that sort of thing, and the word of mouth just spreads.

Philip Taylor: Awesome! So what is the name of the site?

Steve Chou: The name of the site is BumblebeeLinens.com.

Philip Taylor: What is behind the name?

Steve Chou: When my wife got laser eye surgery, she had to wear these goggles. I used to call her a bumblebee. That is actually how we got the name.

Philip Taylor: Okay. I remember those goggles. I had it too.

Steve Chou: Oh did you? Okay.

Philip Taylor: Yeah.

Steve Chou: I am still too chicken to actually get the surgery done.

Philip Taylor: So, how are things now? You mentioned that she is now at home. Are you still with your corporate gig?

Steve Chou: I am, yes.

Philip Taylor: Okay. If you do not mind getting into it, is that just by choice?

Steve Chou: Actually I really like my job. It really challenges me because I am doing technical work. I feel like if I do not keep doing that, I will lose that aspect of my knowledge. That is why I really like work. I really love the people I work with. The hours are really nice, and I get to spend a lot of time with the kids. There is no reason to quit.

Philip Taylor: That is great! I think we have covered most of it. So, tell me a little bit about your other site which is MyWifeQuitHerJob.com. Maybe tell us real quick when you started that and what the reason behind that site is.

Steve Chou: Once we knew we had something big and my wife finally quit (I think in September 2008 – I am not exactly sure which month), shortly after I was getting a bunch of questions from friends wondering how we were doing what we were doing because all of my friends were having kids, and they wanted to quit their jobs and stay at home with their kids as well. I decided to just throw up this blog, describe every process, and document everything that we did to start ours. That is actually how the website got started.

Philip Taylor: Nice! So, have some of those friends also started sites?

Steve Chou: They have actually. I have given a few of them private instruction, and they have launched several sites. It is starting to work out for them.

Philip Taylor: Well, I have definitely checked out your site, and it is just filled with good information. It is solid info, not only about online businesses but just about working online in general. What are the ways that you teach folks online? Do you offer services online to people, someone that might want to get started with an online store?

Steve Chou: You know, up until this point I was offering everything for free on the blog, but in the next couple of weeks I am going to be releasing a full-blown course on how to start a profitable online store. There is going to be 400 pages worth of course material, and I am going to actually lecture live via telecast in a webinar to prospective students where they can actually ask me questions live. That is something I have actually been working on for the past year.

Philip Taylor: That is great! So, tell me more about the live sessions.

Steve Chou: Basically, the live sessions I am trying to model kind of like a college class. You have your syllabus and your course materials, which is like a textbook. Then, I am going to go into more depth live on video about each of the sections. That way people can ask questions along the way and I can go into more depth about the areas that require a little bit more instruction.

Philip Taylor: I see. Then, are you going to record that and make it available?

Steve Chou: Absolutely! All these sessions are going to be recorded and available for watching at any time.

Philip Taylor: That is great! Well, that is exciting!

Steve Chou: Yeah, I am really excited about it! I really like teaching actually. Back when I was in grad school I taught several classes as a teaching assistant, and I really enjoyed it. Teaching is something that I really enjoy doing.

Philip Taylor: That is good. Well, any last thoughts before I leave you here, Steve? You have been a big help I am sure to many who might want to get started in this business. Any last bit of advice or words of wisdom?

Steve Chou: Yeah, absolutely. When I was helping my friends out, they were really intimidated by starting this online business. Really it is not rocket science. A lot of the software and everything is already written for you. What it comes down to is motivation. How badly do you want this? If you want it badly enough, you will be able to do it. It is just plain and simple.

Philip Taylor: Awesome! Good advice! Alright, Steve, well thanks for joining me today.

Steve Chou: Yeah, thanks a lot, Phil.

That does it for this week’s episode. Thanks so much for listening. You can find more episodes at ptmoney.com or on iTunes under the Part-Time Money Podcast. See you guys next week.