How To Start & Scale An E-Commerce Business

The 3 types of packaging:

• Primary Packaging: Packaging that goes directly around the product. Also referred to as “retail packaging” or “consumer packaging”. Includes brand/product label.

  • Example: Snickers bar wrapper

• Secondary Packaging: Packaging that holds the individual product units together and provides branding.

  • Example: Cardboard display box on a retail shelf

• Tertiary Packaging: Protective layer of packaging that is typically used by warehouses and manufacturers to ship the products. This may not include product branding

  • Example: Pallets or wood crates

Primary packaging:

• Balance quality and pricing- do your research to explore all of your options and avoid going the expensive route at the beginning.

• Accept that some things will change- packaging requirements in CPG are frequently changing.

• Be cautious about investing lots of money into your packaging when you’re just getting started- there are many cost effective ways to save money upfront

• Work with a designer who has experience with packaging requirements or specifically the CPG industry.

Secondary packaging:

• Big big box retailers will use secondary packaging to display on shelves so keep that in mind during the design process if you plan to sell anywhere that would keep your secondary packaging on display.

• Strategic secondary packaging can increase retails sales

Packaging resources:

• www.MyBoxPrinter.com

• www.uline.com

Ideal customer:

Download the ideal customer worksheet resource and an example of how to fill in the template.

• Brand Identity: Are you a lifestyle brand or a commodity brand?

• Unique Selling Proposition: What makes you different?

• Competitive Analysis: Who is your competition selling to?

• Customer Survey: Who is already buying from you?

• Social Media Groups: Who is currently looking for a product like yours?

• Social Media Data: Who is showing up on your analytics?

  
  

Questions to ask in your spreadsheet:

WHO is your avatar?

• Age and Gender

• Where he/she works

• How much does he/she earn

• How is her/his performance measured at work

• Where he/she lives

• Her/his passion points

• Favorite social media activities

• Brands he/she loves

• What do these brands have in common

• Where does he/she go for entertainment

• What are his/her ambitions and goals

• What is her/his normal day and week like?

Brand specific asks:

• What are her/his thoughts about {insert your product industry i.e. health and beauty?}

• What are her/his {insert your product industry i.e. health motivations?}

• What problems can your company solve for him/her?/ What do we want him/her to do?
  

  **We suggest using 1-2 avatars to start unless you have financial resources to test multiple markets.

CPG business owners need to understand that their customer demographic will change frequently

• Changes due to: new emerging markets, aging of current demographic, and market trends

• Changes due to analytics and results from advertising

• Use social media to monitor the changes - what are the trends you are seeing. What are people commenting under your posts and your competitors post?

Using social media for your CPG business:

• Social media is a powerful tool that can be used to curate the right customers for your product.

• Over 60% of consumers use social media to follow CPG brands that interest them

• Almost all consumers follow influencers who promote brands.

• Social media gives you a brand voice

• Social media allows you to connect with your customers

Benefits of social media for CPG:

1. Interaction + community

• Social media allows you to answer your customer almost immediately

  • A potential customer is 57% more likely to purchase a product from a brand they follow on social media.

2. Visibility

• Curating content on social media creates trust and familiarity with your customer

• Instagram: online brick and mortar store

  • Aesthetic, personality and values of your brand

3. Direct to consumer

• Social media makes your product easily accessible to your customer

• Links to purchase on your page/profile

4. Showcasing your product

• Show the features of your product

• Show the benefits of your product

• Use influencer to review and promote your products

• You can demonstrate the value and quality of your product

Instagram for CPG:

Prospective customers are likely to research your brand on Instagram. Today's buyer uses Instagram to validate and legitimize your brand.

Instagram allows businesses/brands to:

• Showcase product images- think of Instagram as your brick and mortar store

• Curate UGC (User Generated Content)- show your customers using your products

• Build personal connections with your customers/prospects- engaging with your customer through social media creates community

• Promote posts to reach a broader audience- allows you to track analytics and gauge interest in order to tweak your marketing strategy

• Set up an Instagram shop- users and can purchased straight from Instagram

• Use Hashtags + Location- allows you to track where your customers are and market accordingly

• Track your performance on IG Insights- gives you a real time way to track your customer and interest in your product

Other social media for CPG:

LinkedIn

• Find mentors & professionals in your industry to connect/collaborate with

• Build an online presence for your team

• Establish legitimacy as a company/founder

• Use Sales Navigator if you are leveraging this platform for direct sales

Facebook

• Must have a personal Facebook account to run product ads on Instagram + Facebook (Meta)

• Setting up a brand page creates a community for your customers

• Forum to answer customer inquiries, make announcements, etc.

• Gives loyal customers the ability to follow & like your brand

• Going Facebook groups like "Trends" for guidance on scaling your business and networking

TikTok

• Showcase how your product is used/user experience

• The highest opportunity for virility

• Great for affiliate and influencer marketing content

• Recommended focus for CPG (2023)

Twitter

• Your brand’s voice

• News, announcements, brand-building

• Connect with other brands in your industry

Other Platforms: Pinterest (tutorials, design), Reddit, and Clubhouse

Why community is important:

Building your community:

• Creates a new and focused audience for you to speak directly to

• Generates a sense of belonging with your brand: your customers want to be apart of something and increases customer retention

• Inspires community members to build connections through your brand which increases their desire to be involved in the community

• Community involvement & investment → Brand visibility

• Can give you feedback through polls, surveys, and conversation with community members

• Gives you brand insurance: you can be sure that even if you run into issues, your community will still be there to support your brand

• PR: community is one of the most powerful ways to build long term relationships and provide value

Download the attached PDF for guidance on where and how to build a community

Google:

Should you use Google Ads for your business?

• If you’re able to set aside a budget for digital advertising, this is always a great option.

Types of Google Ads:

• Search campaigns:

  • Recommended for first-timers on Google Ads. This campaign pairs your product with customers’ search terms.

• Display campaigns

  • Google display retargeting

  • Google display lookalike

• Video campaigns

• Shopping campaigns

  • Recommended for first-timers. Like Amazon, many users use Google to search for shopping items. This campaign allows your product to show up in those results.

• App campaigns

• Local campaigns

• Smart campaigns

Examples:

As a first-timer with a limited ad budget, we suggest using the Shopify/WooCommerce plugin for Google, which will walk you through the setup process.

https://apps.shopify.com/google

• Setting up Google Shopping Ads directly from this plugin has yielded great results for the DCPG team.

Types of networking:

Types of Networking:

• Partnerships (w/ complimentary brands): giveaways, email campaigns, shared audiences

• Mentors: find successful people in your industry who are willing to offer you guidance and support

• Investors: begin building relationships with potential investors as soon as you launch your business

• Large Influencers: consistently engaging with larger influencers can lead to connections to a powerful platform for your product

• Potential hires/partners: networking is a great way to build your dream team

  • angel.co

Partnerships:

Where to find potential partners:

• Accelerator programs

• Local networking events

• Social media (talk about how to reach out to each)

CPG accelerator programs:

• Food-X

• Lafayette Plug and Play Accelerator

• Sprint Accelerator

• Target Accelerator

• Disney Accelerator

• XRC Labs

• Thrive Accelerator

PRO TIP: social media is the simplest and most cost effective way to find partners

• Sample DM / outreach message for social media giveaway:

  • “Hi Kelsey, I’m a huge fan of [insert their brand name]. We just launched a [insert type of product] brand, [insert name of your product]. We’d love to do a giveaway with you. [If your brand has significantly less followers than the brand you’re reaching out to, be sure to offer them something in return, like free product]. We’d be happy to organize the giveaway in exchange for your collaboration. Please let me know if that’s something you’d be interested in. Looking forward to hearing from you! [-Your name]

PRO TIP: We have had tons of success finding partners and leads via TRENDS : https://trends.co

Mentors:

Finding a mentor:

• Think about finding a mentor as an interview process

• You are looking for someone in your field whose career or business trajectory you’d like to emulate

• A mentor will be able to answer your business questions in a more personal manner than Google-searching for the information you need

Example: At DCPG, we have experience with packaging and shipping orders ourselves in the early stages of our business. Now, we now know how to mentor someone through the process of finding the right 3PL. This has a lot of value because it helps the entrepreneurs we mentor to save time and money by avoiding costly mistakes. The right mentor can save your business money and help you grow faster from the very beginning.

Macro influencers:

How to meet high-end influencers to partner with:

• Arrange meet-and-greet

  • You can expense this

  • Talk about it like a partnership and what they will get out of it

• Influencer/podcasting

  • Can be expensive and influencers will want money or product for attendance

Always make sure to have a contract in place with these high end influencers to make sure it is an equally beneficial transaction.

Hiring employees:

Where and how to meet potential employees/partners:

• General networking events for potential co-founders/COOs

  • Connect with people on both a personal & professional level

• Meet potential employees face-to-face

  • Avoid doing an extensive search for first-round interviews

Download the PDF resource for a step by step networking guide

Do you need investors?

• Depends on your financial situation

• PRO TIP: Bringing on investors makes the most sense for CPG & tech companies because overhead and expenses are high and cash flow is crucial to growth. If you have the capital to invest yourself, we highly recommend doing so as answering to investors is a full time job.

Valuation:

How do you -- and potential investors -- assess the value of your company?

• There are professionals who are well-versed in assessing a company’s finances and assets to determine its valuation.

• If you are taking this course, it’s probably too soon to get an accurate valuation

Assessing valuation:

Example:

Your company’s current valuation: $1 million

Investor A owns 5% equity

If you sold your company today, your investor would get $50,000.

Convertible equity:

• Convertible equity is a popular form of financing that gives early investors the right to preferred stock.

• Unlike standard equity, it does not force the investor to agree to a certain percentage.

• Instead, the investment converts to equity once the valuation of the company has been established.

• With convertible equity, investors typically get a discount (~20%) for investing early.

Convertible equity offers two main benefits:

• Can postpone the valuation discussion

• Faster & less expensive agreements than equity deals

Valuation cap:

A valuation cap is a way to reward seed stage investors for taking on additional risk.

• The valuation cap sets the maximum price that your convertible security will convert into equity.

• To translate it into share price, divide the valuation cap by the Series A valuation.

Ways to raise money:

• Friends and Family: create a pitch deck to detail the benefits of their investment

• Kickstarter/crowdfunding platform: can be great for early-stage companies, but be aware that successful campaigns often require a substantial investment in marketing & PR.

• Conventional investors: go to networking events or message investors on LinkedIn and ask for an opportunity to pitch your product

Other options to fund your business:

• Presell: create advance demand for your product before you even launch by creating a landing page and marketing campaigns that offer a discount to founders or early subscribers.

  • We recommend offering a substantial discount to your presell customers because they may have to wait a long time to receive their product.

• Additional income streams: this is an obvious one, especially if you don’t want to give up equity in your business early on.

• Business loan from bank

• SBA Loan

• Business loan from family/friends: this is a great option because it enables friends & family to make a quick return on their investment and will typically provide you with lower interest rates than a bank.

• Peer-to-peer lending: there are several different platforms for this. Depending on your financial situation, this may be a good option. However, we’ve personally found the interest rates to be very high for first-time entrepreneurs

• Credit cards/new line of credit

• Grants

• Fintech: platforms like PayPal and Kabbage provide loans or lines of credit as an alternative to traditional bank or government loans.

• More alternative funding options are becoming available, and typically provide similar loan amounts and lending terms to traditional options.

• Pitch competitions: this can be a great way to network in the startup community, especially if you have a strong mission attached to your company.

Projections:

Here are some important components you won’t find on many projection sheets but will help you fill in the blanks:

• Define unit economics - what is the total COGS for one unit from creation to shipping to customer

• Assumptions - your assumptions tab should be what you think certain fixed values are. For instance, you can assume that (based on research) your CAC (cost to acquire a customer) will be $2.00. You can assume that your ROAS (return on ad spend) on Amazon will be 0.7 (70%) in year 1 and gradually rise to 1.8 (180%) in year 2.

Download the SCORE projections resource for guidance on projections that major financial institutions understand.

Make your investors work for you:

Mindset & positioning:

• If you truly believe in your product and you have validated your idea, then your mindset should align with this when you’re dealing with investors.

• You are offering investors an opportunity to make money from your company, NOT asking investors for a favor and begging for money you desperately need.

• Make sure the opportunity you are offering is clear.

• You are CHOOSING the investors; not the other way around.

• Have a decision deadline and share it with potential investors.

• Know EXACTLY what you want. Investors are looking to invest in entrepreneurs who lead with confidence and demonstrate a clear path to profitability.

Getting started:

• Create a LinkedIn/email funnel for investor outreach. Keep your outreach messages short and simple. Ask potential investors if they are open to hearing about a potential investment opportunity and provide a brief summary of your product.

• Utilize the LinkedIn search bar using keywords like “investors”, “CPG investors”, “product-based investors”, “plant based investors”, or other keywords that relate to your company.

• Set up a spreadsheet to track the outreach messages you send each day, update the status when anyone responds, and track where they are at in the funnel

• Schedule “initial” call or meeting with investors

• Create a follow-up email sequence for investors who have not responded

Pitch deck:

The best way to learn about how to create a proper pitch deck is to look through a successful one. Please remember, the best pitch decks are: simple, tell a story, and demonstrate a path to profitability for investors

Examples of well designed pitch decks for fundraising: https://pitch.com/blog/15-great-pitch-decks-from-successful-startups

Why this is important:

• This journey of building a CPG company can be grueling some days

• As CPG business owners there are so many moving parts at all times, making the probability that something could go wrong very high.

• Its just as important to celebrate your wins as it is to reach your goal

Tips:

• Set goals for yourself and your team on a weekly, monthly, or yearly basis

• Take time to celebrate those wins when your goals are met

• Focus on not moving the finish line- even the smallest win is a still a win

• Not only are you able to reflect on your success and appreciate what you have created even more, you are also lighting the fire to hit that next goal.