Ecommerce in 2025: Mid-Year Lessons, Surprises, and Smart Moves

Welcome to the podcast, Lauren.

0:18 Lauren Maillard

Hey, thanks for having me. This is fun and exciting.

0:22 Stephen Brown

This is our first podcast in like four months. I've been AWOL. Maybe I'll start there, for the 100 fans that actually listen to the podcast.

We started this podcast at the beginning of the year, 2025. I am the host. And in the beginning of March I got hit with the flu, which then turned into a rare type of shingles that actually hit me in the nerve cluster around the ear, resulting in facial paralysis, hearing loss in one ear, and balance issues. Not to mention just being really tired. I was in no condition to do the podcast. The team thinks that I am actually okay to podcast. I still feel like I have a slur when I speak.

1:15 Lauren Maillard

Yeah, I don't hear any slurs there, Stephen.

1:18 Stephen Brown

We'll see what the audience thinks. But my energy is back. My face and my hearing is not. If you're watching this on YouTube, you're going to see a goofy looking eye that won't blink, it's drooping. And obviously my mouth looks weird, I'm going to talk out the good side of my mouth. So yeah, that was crazy.

1:37 Lauren Maillard

So Ramsay Hunt, that's the same thing that Justin Bieber had.

1:40 Stephen Brown

Yes. Yes, the most famous case of Ramsay Hunt. If you go Google Ramsay Hunt syndrome, you're going to get like 50 results of Justin Bieber. And the videos are all about the same. They're like three minutes of what it is, kind of that high level overview. Really helpful, but nothing down in the weeds.

1:59 Lauren Maillard

So then are you number two? Justin Bieber and then Stephen Brown.

2:02 Stephen Brown

I wish. I don't know, I've got to scroll a lot.

Yeah. So I started a YouTube channel, because we do YouTube here at LedgerGurus. And I thought there's not a lot of personal vlogging sharing what it's like to go through this condition. I'm four months in and still have a lot of issues. And so in my first week I just felt like I should do that. And so I've been doing it for the past couple of months, exercising my YouTube skills. If you want to watch Ramsay Hunt Stephen and be bored about medical progress, that's where it's at.

2:38 Lauren Maillard

Hey, I think it's great that you're doing that and bringing some awareness for others. And we are incredibly happy to have you back. It's pretty amazing that you've had so much recovery so far.

2:52 Stephen Brown

I am happy to be back. And it's been a crazy year. I've been staying somewhat engaged over time, I've gotten better. But wow, what a weird year for ecommerce.

3:05 Checking the predictions, and the end of de minimis

Lauren Maillard

So I think we're here today to see if you are the ecommerce Nostradamus. Is that it? I'm going to go over some of your predictions for the year.

3:12 Stephen Brown

Yeah, so the inaugural episode was really 10 predictions for 2025. And I thought it'd be good to kind of check in. Not on all 10, maybe we'll do that at the end of the year, but just talk about some of these key things. I feel like I got them right, but it wasn't hard to predict. Although some of these predictions did not turn out the way I thought they would.

3:34 Lauren Maillard

Really? What's the biggest one that didn't turn out the way you thought it would?

3:38 Stephen Brown

Well, I think, you know how at the end of the year Webster's does the word of the year? If I was doing ecommerce Webster's, the word of the year would be tariff. And the way that tariffs have turned out was not what I expected.

3:52 Lauren Maillard

Well, every time I look at the news there's something new with tariffs. Especially today, we're recording and it's July 10th. So there's a lot going on.

4:02 Stephen Brown

July 10th, yeah. We're kind of in tariff transition week, where the 90 day pause is over.

I think what shocked us all was we were expecting something like the first term of the Trump administration, where he's going to come in, he's going to raise some tariffs, it's mostly going to be focused at China. And instead it was like this nuclear bomb on the entire world, especially with the initial announcement. And we're kind of settling into what it's going to be, but it was a huge shock to the system.

4:33 Lauren Maillard

Did you see the latest tariff to drop?

4:36 Stephen Brown

I did not. What's the newest tariff?

4:38 Lauren Maillard

50% on Brazil.

4:40 Stephen Brown

Oh yeah, I read about that. Brazil is in the ire of Trump because of the previous president. He feels like he isn't getting treated well, so he's putting some smack down on him.

4:52 Lauren Maillard

I feel like if Trump can go after a friend like Brazil, then really everything's open and on the table for him when it comes to tariffs.

5:00 Stephen Brown

Well, the one that kind of shocked me, and this was where I was like, okay, this is the baseline, was the UK. The UK, my understanding is we have a trading surplus. So we export more to the UK than we import. And that was one of the things they talked about, is we've got balanced trade. So you think, oh, they're going to get a really great deal. But they still got a 10% baseline tariff.

And at that point it's like, okay, 10% is the floor. We haven't seen anything lower than that. There's the chatter about the EU having a 10% tariff. But this week they announced a lot of the Asian countries, and we're seeing better than what he announced in April, but still like 20 to 40% range.

5:45 Lauren Maillard

I mean, we're seeing him wipe out any price competition that South Asia had, right? I mean, that's really what's happening there.

5:55 Stephen Brown

Yes. Although here's what I'm understanding, especially with China, is they're so good at manufacturing, it's less about cost than it is about capability.

But you're still experiencing, as we've seen with brands, we spent the last couple of months meeting with a lot of brands, initially that 150% tariff, whatever it was, they were just like, when it was like two kids in the schoolyard, they're just escalating, escalating.

6:19 Lauren Maillard

125, yeah. But yeah, it was crazy.

6:26 Stephen Brown

It's basically a blockade. But still, an additional 30%, additional 40%, that's a huge hit to a seller's margins. And I do think sellers can absorb a good chunk of those, but it's really going to hurt.

What have you been hearing as you and I and some other team members at LedgerGurus have been meeting with customers? What are some of the conversations you've been having around tariffs?

6:57 Lauren Maillard

Well, I think there's just anticipation of what they should do. And we're kind of at a moment where they've got to decide and finish making any orders for Christmas. So what do they do? I think the tariffs are here to stay, but there's some anticipation because it's going to really cut into their profit margins.

7:23 Stephen Brown

Yeah, I've also seen a lot of wait and see. And I think we're past the wait, and now we're starting to see, and really now it's time to act. And it's not pretty.

I think a brand with strong financial performance can navigate through this. But I'm concerned about those brands that are really kind of barely above break even, that unless they take some aggressive actions, this could be the end of their journey.

7:52 Lauren Maillard

Yeah. If your margins are tight and there's not really much you can do, go and find other suppliers. I'm not sure where exactly that is.

8:10 Stephen Brown

Yeah, I think Vietnam, this is the interesting one for me. Vietnam, the announcement was like 20%. And we've already seen a lot of manufacturing shifting there. That's probably going to accelerate it. There was this caveat, if they see any sort of shenanigans of China trying to pass through Vietnam, they're going to slap that down.

But my understanding from talking to our customers in the past is Vietnam has been built up by both the Koreans and the Chinese, who have good manufacturing capabilities. And they've developed some pretty strong manufacturing resources. I think Vietnam already was shifting, but I think this is going to accelerate its place as a manufacturing hub.

8:57 Lauren Maillard

So along with tariffs, we have the de minimis rule. So that is now a thing of the past.

9:04 Stephen Brown

Yeah, the de minimis was one of the things that I was looking at for the beginning of this year. And when you have both political parties talking about killing something, you know it's almost guaranteed. So they had already started with the Biden administration putting in the groundwork to end the de minimis rule, which allowed shipments under $800 to come in without duties or tariffs. And I think this created things like Shein and Temu.

Now they are going to have to operate more as traditional businesses. I think TikTok Shop, there's probably a fair amount of de minimis sellers on there. And I do wonder, as I've read the news, TikTok's US ecommerce office has had a lot of layoffs. I'm wondering how much of that is influenced by the de minimis rule and maybe some of the advantages going away.

10:00 Lauren Maillard

Well, just take a guess of how the shipping volume for Temu and Shein has gone down in June.

10:07 Stephen Brown

I haven't seen that. How much has it gone down?

10:10 Lauren Maillard

28%.

10:12 Stephen Brown

From year over year or month over month?

10:15 Lauren Maillard

Month over month.

10:17 Stephen Brown

I'm surprised it's not higher, to be perfectly honest.

So one of the big announcements with the death of Chinese de minimis was a month or so ago. And with the passing of the strangely named big beautiful bill, they are phasing it out globally by 2027.

10:41 Lauren Maillard

I think we still have a month though. Enforcement doesn't start until the beginning of August.

10:48 Stephen Brown

August, yeah. So I think there's still going to be, you'll see de minimis exemption imports for two years. I can't remember what it was, like July 2027. So there's time.

I have mixed feelings about the de minimis rule.

11:07 Lauren Maillard

Oh, why is that?

11:09 Stephen Brown

Well, I'll tell you where I think it's good if you're selling online, and I'll tell you where I think it's bad. Let's start with the bad. If you are doing a lot of international drop shipping, so you've got manufacturers and they're drop shipping direct for you, your business model is collapsing.

11:25 Lauren Maillard

It's dead. It's gone.

11:35 Stephen Brown

Well, if you're not in China, you've got two years to figure something out.

But if you're selling through kind of traditional import methods, where you're having to go through customs and pay duties and tariffs and all that, guess what? All your competition that was leveraging low cost de minimis exemption strategies, they're going away. So for those sellers that have been doing bulk imports, going through all the compliance, I think this is a really good thing for them.

12:07 Stephen Brown

So I think it's a mixed bag, the de minimis rule. Personally, I kind of think it's good. I feel like it got abused. One of the things I've read about, and you know this coming from a sales tax background, a lot of Chinese sellers in particular, they're not registering in the US, they're not paying sales tax.

12:29 Lauren Maillard

Yeah, I can see that. They have unfair advantages, really.

12:33 Stephen Brown

So I'm all for getting rid of the unfair advantages. But what's hard is if you had a legitimate international drop shipping element of your business, or if that was your entire business, you've got to recalibrate.

12:47 Lauren Maillard

Rethink. Yeah, absolutely.

12:49 The big beautiful bill, and marketing costs

Lauren Maillard

So you mentioned the BBB, the big beautiful bill. You had predicted that this administration was going to continue to be really business friendly. Taking a look at it, what do you think? Is it?

13:09 Stephen Brown

Well, I think if you're not in ecommerce, it's pretty business friendly. The tariffs are just crippling for ecommerce.

The problem with the big beautiful bill is it's enormous. But there are a number of provisions that are going to be really advantageous towards business. Some tax treatment around large purchases that used to have to be amortized, where you could only recognize the cost of that investment over a period of years. You can now put that on the first year.

13:41 Lauren Maillard

Yeah, that's your 179 and your bonus depreciation. So you can take all of those in the first year.

13:46 Stephen Brown

Yeah. And they're going to extend the qualified business income deduction in perpetuity, which is really great. That's only for pass through entities, which I think is awesome.

Because the big guys, I've worked for big corporations and let me tell you, they know how to avoid taxes. My last company, I talked to one of our lawyers and he was showing me our corporate entity map. And it was like a maze. Like the Bahamas and Ireland and the Netherlands. And there are all these weird configurations you can do to minimize taxes legally. So they have the ability to do those complex corporate structures and the small guys don't.

14:40 Stephen Brown

So the qualified business income, I feel like, is a little tip to the small guys to say, hey, we're going to reduce your taxable net income by that percentage. And I think that's awesome.

So I think there are some provisions that are going to be good for business, but unfortunately I think the tariffs are outweighing those benefits to ecommerce.

15:00 Lauren Maillard

Yeah, I would agree with that.

So going on to another prediction, marketing. So you talked a little bit about rising marketing costs. What have you been seeing? You own a small ecommerce company.

15:19 Stephen Brown

Yeah, so I have had my business partner on the podcast, Preston. I haven't really seen anything change for the better or the worse this year. It feels like it's still kind of a grind, you can get there. But the days of easy money, they're just so long gone. And I still see a lot of brands that are struggling with their marketing efficiency. But I don't see it getting worse. So I'd say it's about the same.

15:53 Lauren Maillard

And you want that to kind of stay between 20 and 33%.

15:59 Stephen Brown

I think it really depends on your business model. I think you can make an argument to even go higher if you have, one, the capital to spend more, and two, a lifetime value that really makes it worth making that investment. So that's one of the things you've got to look at, is lifetime value. Two, do you have the cash resources to do that? And that works more with direct to consumer brands.

If you're reselling on Amazon or a Shopify store and you're just doing Google AdWords, I think you're going to need to be well below 20% ad spend to create a reasonable profit.

16:45 AI as a sales channel

Lauren Maillard

So we've talked about it a little bit, about AI and how AI and ChatGPT is actually changing advertising and marketing for ecommerce firms. Do you want to talk a little bit about that?

16:54 Stephen Brown

Yeah. And I'd like to ask you a question too, at some point.

Last fall I went to a conference and I'm sitting around a table in a really noisy restaurant in Las Vegas, could barely hear. If I were to go there with this condition, I wouldn't have heard a word they said. It was one of those environments where you had to lean in to hear anything that was being said.

But a couple of my friends in the industry, Chad Davis, Geoff Gualano, who's been on the podcast, they're talking about, I don't even use Google anymore. And I'm like, you weirdos.

17:50 Stephen Brown

But since then, I haven't completely stopped using Google. But what I found is I'm doing so much more in ChatGPT. And when I do use Google, I find myself using the AI results, which are at the top. And so I take back everything I thought about you, Chad and Geoff. You guys are just ahead of the times.

And I think we're seeing a massive shift, at least with tech forward people, away from traditional search to more of the AI search. And this is going to change things in a big way.

18:16 Lauren Maillard

Well, I've been doing kind of an informal poll of people around me and I've been asking them, okay, when was the last time you used Google? And I'm like, I don't know. I'd say 60, 70% of the people that I interact with daily, so most of them here at LedgerGurus at work, Google's done for them. They go directly into ChatGPT.

I mean, I myself, it used to be I'd go on Amazon if I was looking for something. So just last weekend, I was cleaning out my Tupperware. Yeah, the funnest thing I ever did do on a weekend. But I was cleaning out my Tupperware drawer. And normally what I would have done is gone to Amazon, read all of the reviews. Instead I went to ChatGPT, I told it what I wanted. I mean, it was bing, bing, boom, done. And it was awesome.

19:11 Stephen Brown

Did you get a recommendation of something to buy?

19:14 Lauren Maillard

It recommended a few of them. I looked in, read the recommendations, and then I just picked one.

19:20 Stephen Brown

Yeah. I did the same thing this week.

I've been playing around with AI agents, and so I had a custom GPT for my RV. Which if you have an RV, you know they are a nonstop repair. And it used to be YouTube and Google and how do I figure out this, that. So I've been training an agent to be my kind of troubleshooter, and it's been awesome.

But this week I had some brackets on the generator exhaust that had broken. Took a picture. I said, hey, I need to repair these brackets. I can't remember what I said, but it spun up a couple of options.

20:10 Stephen Brown

Obviously it gave me a whole bunch of, this is the one thing I think that I don't love about ChatGPT, is it's like your chatty friend. Sometimes you're just like, just give me a quick answer. And it just wants to blather on and tell you a million things. And so I was like, okay. And then at the end it had two links to products. And I kind of did the same thing. I was like, oh, here it is. In fact, let me see if I can find it, it's kind of interesting.

20:47 Stephen Brown

And this is not what I expected when I was thinking about AI. I was thinking about AI tools as a cost saving technology. And instead what we're seeing is, I think AI is maybe the new sales channel.

Yeah, so here it is. You can see it here. I just said, I need new brackets for the generator exhaust pipe. And I took a picture. You can see this ghetto rope holding it up. Obviously it gave me a blah, blah, blah, blah. And then at the bottom I'm like, oh cool, here it is. And this is the one that I needed. Clicked on it, ordered it, done.

21:30 Stephen Brown

And to me, that's the bigger game changer. It's like, oh man, AI and ecommerce is not just about using the tools in your business to create more efficiencies, which I still think it is, but it's now about a sales channel. And I expect eventually an ad channel as well. These companies would be fools not to open up an advertising model. And so I think it just makes sense, right?

But I call it AI optimization. I think this is going to replace search engine optimization. How can you get your product to be considered in the tool?

22:13 Stephen Brown

A note on the other thing that I was thinking at the beginning of the year. My partner Preston, we're talking about things and he has been kind of winding down some marketing consultants, and just like, hey, I can do it myself with the tools and I can probably get more of the desired outcome. So we are kind of cutting costs there and replacing it with AI tools. So yeah, AI is changing so quickly, it's crazy.

22:45 Lauren Maillard

Well, this afternoon I spent some time playing around in Copilot with Dillon, who's our head of IT here at LedgerGurus. And we were testing one of the agents and I'm so excited. I mean, giddy with joy.

At the beginning of the year I thought, sure, AI is going to change things. But I didn't have the vision of how it would help me as a professional become more efficient and effective. And I just am so much more productive now, just using ChatGPT. But now with the ideas and the agents that we're working on, I'm really excited to see how we can continue to push forward.

23:30 Lauren Maillard

And I think that goes for all small business owners now. You've got resources and ways to reduce costs that we just didn't even have. And I feel like we're kind of at that tipping point. Critical mass is about to be hit. People are going to become really comfortable with this. And it's exciting to see where it's going to lead to. It's another way that the playing field is being leveled.

23:57 Stephen Brown

Yeah. I got my start at the beginning of the dot-com days. And I kind of feel like this is the parallel I'd put with AI. This feels like 1999 for the World Wide Web. Like it was just starting to really explode, but you go back and look at websites back then and just the web in general, it was just a very different experience.

24:23 Lauren Maillard

Was it Firefox? What was the?

24:26 Stephen Brown

No, that was, you're like Netscape. That was the big browser.

24:29 Lauren Maillard

What was that webpage hosting? I don't know, the old one. Fire something.

24:34 Stephen Brown

Yahoo. I know, I think there was GeoCities.

24:41 Lauren Maillard

Okay, I kind of have to go. But I feel like today with my first successful agent, it's kind of like the first time I Googled something. I remember the first time I Googled something. And yeah, it's my first agent today.

24:57 Stephen Brown

Do you remember the first thing you bought online?

25:01 Lauren Maillard

I remember the first thing my sister did. It was actually from Overstock.com.

25:07 Stephen Brown

Okay. I think the first thing I bought was a CD on CDNow, I think. Yeah, it got bought by Amazon. I have an Amazon transaction from 1998. I'm not sure if that was a CD. I don't know if it was CDNow, but that's kind of where my internet ecommerce experience started.

Yeah, you can go back. So if you want to go back and look at your purchase history, it's kind of fun to see what was the first year you bought something and what was it that you bought. Now back then it was like books and CDs. That was kind of the big thing in the beginning of ecommerce. Unless you're like eBay, then who knows, you're buying all sorts of weird stuff. It was the swap meet, it was the garage sale, right? And for those that were into that, that was great. But for me it was books and CDs.

25:56 Lauren Maillard

eBay is the garage sale of ecommerce.

Yeah, well, I was super excited when we tested it and we saw that it worked. And yeah, we'll see where we are in the next few months.

26:13 Stephen Brown

Yeah. I mean, there are actually ways you can enable your store to be discoverable on ChatGPT. That's something I think every brand should be doing.

I've been reading that there are talks about making it so that you could actually do checkout in ChatGPT at some point. And I just think every AI platform, it's just a no brainer. There's money to be had there. We know that ecommerce and average ecommerce advertising has been a huge part of internet search monetization. So I see no reason why that doesn't carry forward in the AI platforms and tools.

26:53 Lauren Maillard

I'm sure it will.

27:00 TikTok, six months on

Stephen Brown

All right, what else are you thinking about these days, Lauren?

27:02 Lauren Maillard

Well, you know, TikTok was on your list.

27:07 Stephen Brown

Yeah, TikTok. It was really hot going into the end of last year. And I think even in the beginning, the big buzz was there was going to be the ban, and Trump gave it a stay of execution. Did it again. But I don't hear people talking about TikTok as much.

27:24 Lauren Maillard

I think that's just because you don't use TikTok, Stephen. You've got something against it, I don't know what it is.

27:33 Stephen Brown

Well, my background before coming to LedgerGurus was information security. I spent almost 20 years there. And TikTok was one of the apps that we would talk about in that world about being super intrusive. All the threats and concerns that have been voiced in the government were actually being discussed in the information security community as legit issues.

My big beef, on a personal level, with TikTok and short video in general, is just it's so addictive. But that's great if you're selling stuff, because you're going to have a whole lot of view time.

28:14 Stephen Brown

And I guess my thing that I'm not seeing, because I'm consuming a lot of ecommerce news and content, is I don't see a lot of discussion around advertising on TikTok. It doesn't feel like it's the same level that it was last year. And I think part of that might just be the uncertainty. Is it banned, is it not?

28:33 Lauren Maillard

Well, we know what's happening now. Have you?

28:37 Stephen Brown

Well, yeah, I've read a little bit. I think you're more up on it because you've got the TikTok addiction going full strong.

28:43 Lauren Maillard

Yeah, I do. I have been so anti-social media, and then I'm a full on TikTok addict. I don't know what it is.

I do say I don't think I've ever bought anything from TikTok. TikTok is QVC and Amazon put together. It's that social commerce, and they do a really good job of pulling you in.

I think what has surprised me is I was kind of looking at some numbers, and 14% of Americans use TikTok.

29:24 Stephen Brown

Is that all? 14%? It's mostly Gen Z.

29:31 Lauren Maillard

So probably. But it was 35% growth year over year, which I thought was pretty crazy. Yeah, I don't see it going anywhere.

29:36 Stephen Brown

I will say the algorithm, I looked at it a couple of years ago and was like, peace out, this thing sucks. Then I was doing a little bit of testing because we did a TikTok episode, one of our early episodes. And so I was like, I've got to get down and do some research and not look like a boomer. No offense to boomers. Hey boomer, that doesn't know what he's talking about.

And I definitely thought the algorithm was better. But again, after that I was like, the last thing I need is more social media in my life. And so I got off.

30:12 Lauren Maillard

Yeah. I think it is very addictive. But what I think is kind of interesting is there is that halo effect, right? So I've never bought anything off TikTok personally, but I will go to TikTok, I will do some searching on there, and then I'll go to Amazon, because I am comfortable with Amazon. I know when it's going to be delivered. I know that there's some security, or it seems, I shouldn't say I know there's security, I'm not an IT person at all, but I trust it. Everyone knows Amazon.

30:52 Stephen Brown

Yeah, there's comfort transacting with Amazon.

And Michelle, who did the TikTok episode with me at the beginning of the year, talked about this, that there is a halo effect. I think for TikTok the jury is still out. I think if you can get the ban settled and stable, I would expect that will continue to evolve.

My experience when I got on there, I actually went to the marketplace and it felt kind of really, I don't know, it felt cheap. That was my experience, it felt cheap. So I think if it can stabilize, bigger brands, more reputable brands will probably get on there.

31:40 Stephen Brown

One of the things that Michelle said is it's very impulse buy style, because it's like scroll, scroll, hey, that looks good, buy it. It's got a great checkout process and then move on.

31:55 Lauren Maillard

Well, one thing I haven't looked into, but I do want to look into and understand a little bit more, is they will push the same thing massively. You'll see it absolutely everywhere. And you'll see that big thing for, I don't know, a month maybe, and then it'll be on to the next big thing.

But there are some big brands on there, I see them anyways. And what was interesting, last time I was on, it did say that I could hook it up to Amazon and order Amazon through TikTok.

32:19 Stephen Brown

Yeah, that's my understanding as well, is Amazon integration.

I don't know. Algorithms are interesting things. I'm still trying to teach the Facebook algorithm to send me the right stuff. I've made the mistake, this is the problem of serving ecommerce companies, and we have a decent amount of women's brands, that I always forget. I'm like, dang it, I clicked on it and I'm not in incognito. And now it reinforces the Facebook pixel that I'm a woman. And so I'm constantly getting served up like leggings and women's apparel. And I'm like, I'm not a woman. More running stuff, less women's clothing.

32:57 Lauren Maillard

You just say, I'm not interested, and then you're good.

33:00 Stephen Brown

I've tried that. I just cannot get the Facebook algorithm to, I'll go like, give me more running stuff, because that's kind of one of my passions, and it won't. It's really frustrating.

33:14 Lauren Maillard

We all know you bought some women's leggings to go running in there, Stephen. You can just admit it.

33:17 Stephen Brown

Got my Lululemons. Although guys wear Lululemons now too, so hey, I shouldn't judge.

What else do you think about?

33:30 Interest rates and a weakening dollar

Lauren Maillard

Actually, interest rates. Do you want to touch that maybe first?

33:34 Stephen Brown

Here's something I'm thinking about. What do we do for the rest of the year?

Interest rates. Yeah, so it was looking super good going into this year, right? We had an interest rate cut at the end of last year, and there were predictions of many cuts. And then I think we've seen a lot of inflationary economic policies.

Also, we have a Federal Reserve that is very conservative and slow. They were slow to raise interest rates when things heated up at the beginning of COVID, and then they're really slow coming down. And I think they have some legitimate concerns, but it is unfortunate, because for sellers there aren't a lot of great options in terms of working capital loans for inventory. And it'd be really nice if we could see interest rates go down.

34:30 Stephen Brown

But I think I'd be surprised to see one cut this year at this point. I think there are just too many inflationary economic policies. Everything I'm reading about the big beautiful bill is it's going to be very inflationary.

34:41 Lauren Maillard

Well, add on to that, right, the dollar's weakening too. That's not going to help inflation either.

34:46 Stephen Brown

Yeah, that's something you brought up. We talked about the other day, you brought this up and I was like, yes, it caught me off guard in our DTC brand, Solé Toscana.

There's kind of this double whammy. Whammy number one is the tariffs, but whammy number two is we're seeing the dollar weakening. And so even if you didn't have a tariff, your product costs are going up just because currency exchanges are disadvantageous.

35:20 Stephen Brown

And that sucks. I mean, that's usually something you hear about from Wall Street when I used to work for Fortune 500s. They would talk about, sorry, the dog distracted me for a second, the pitter-patter.

I worked for some public companies, and so obviously I was very in tune with our quarterly earnings, and they'd always talk about, blah, blah, blah, exchange risk, blah, blah, blah. And you're like, what the heck? Now that I'm in this seat doing what I do, it's like, yeah, currency exchange is a huge issue.

35:55 Stephen Brown

And the problem is, these big Fortune 500s have some things they can do, because they're usually selling globally. So they can keep foreign currencies there. If they have operations, they can use the sales to fund operations in those countries.

But a small seller typically, they're not selling into China. Like our brand, it's an Italian product, we're not selling in Italy. We're selling an Italian product into the US. So it's not like I've got euros that I'm gathering in Italy or anywhere in the EU that I could then use to buy my inventory.

And so what happens is you have this exchange risk. And I don't have an easy answer for a small seller, how to deal with that, other than you just have to plan on decreased buying power and use the different levers that you have to address that accordingly.

37:06 Which levers to pull, and the rest of the year

Lauren Maillard

So I'm just thinking a little bit about you and Solé Toscana. How are you guys going to manage it? What do you guys do?

37:14 Stephen Brown

Well, I think there are a couple of levers you have to pull. And I think a lot of people have been sitting on the sidelines.

Lever number one is raising prices, which isn't great when people have already experienced a lot of price increases over the last two years, but that's one thing you can do. We can try and get better pricing from our manufacturing, easier said than done. So we are talking about pricing. And we're actually looking at both sides of the equation, like should we lower price and see if we'd increase volume?

37:50 Stephen Brown

We are definitely looking at cost cutting. It's a pretty small business, less than a million dollars in revenue, so we're looking at contractors and software. If I was a bigger brand, I'd really be looking at my payroll. There are different places you can optimize fairly quickly.

So I think we've been doing expense cutting primarily so far, because that's easier to do than your fulfillment, your cost of goods.

38:20 Stephen Brown

And then we're constantly talking about marketing spend, constantly. And I think any brand that isn't constantly scrutinizing and discussing marketing spend is missing the boat, because that is one of the primary levers of an ecommerce business. And you just need to be watching that very closely, because it's so easy to spend a lot of money and not get a great return.

38:46 Lauren Maillard

I feel like that could be a really big segue into your experience with Profit First. Have you talked about Profit First on here? I don't think we have time today, but.

38:55 Stephen Brown

No. Preston and I, that's on my list of episodes, is to do a Profit First episode. So stay tuned, we'll do one of those in the future.

But yeah, as a preview, you're basically focusing on being profitable first and then building in your expense model from there, versus the other way around, which is just spend, spend, spend, and then you're like, I don't have any profits, crap.

So that's a good teaser. I need to get Preston pinned down so we can tell the story of how we took a business from losing money to making money using Profit First.

39:34 Lauren Maillard

I remember when I was doing my MAcc, doing some math problems and really focusing on how it's smarter to cut costs than to get revenue, for the bottom line. So I think it'll be really interesting to hear about your experience with Profit First.

39:52 Stephen Brown

Yeah. I mean, those levers are what I'm thinking about as we look at the end of the year. You've got to have, if you haven't pulled one of those levers already, you probably need to, because the tariffs are coming in and we're seeing increased cost of goods.

Expenses is one of the easiest ones to hold. Raising prices is easy, but you have to consider decrease in volume and impact to your customer base.

40:20 Stephen Brown

Maybe this is a good transition into what we're thinking about for the second half of the year. I expect a lot of price increases across everywhere in the second half of the year. It kind of sucks, but Christmas is going to be a lot more expensive this year. It's going to have to be.

40:40 Lauren Maillard

I was kind of surprised to see, when it comes to inflation on services, it's gone up about twice as fast.

40:48 Stephen Brown

Yeah, we feel that. You want to talk about cost increases, come run a services business. We've seen payroll costs just skyrocket the last few years.

41:01 Lauren Maillard

Yeah, it's not a pleasant thing to be thinking about right now. It's definitely something that we're needing to budget for and we're needing to plan for, and that we're having to come up with a strategy of how are we going to pass that cost on to our clients, or if we don't.

41:19 Stephen Brown

Yeah, and I think that's a problem with every business, whether you're services or ecommerce. You're like, I'm having increased input costs and they're squeezing my margins, in some cases making my business unviable. How do I navigate through that?

And price increase, as painful as it is, it works, right? I mean, we are a big QuickBooks shop, and I'll tell you, the kings of price increases are Intuit. They raise prices every year, like clockwork. Ridiculous amounts, I don't know, but you see a lot of that in SaaS. The good SaaS companies, good tech companies.

41:50 Stephen Brown

Netflix is a good example, right? How much did you pay for Netflix when you first got it?

42:05 Lauren Maillard

7.99.

42:12 Stephen Brown

That's about what I think we paid. Now what is it, like 21 bucks for the basic plan?

42:17 Lauren Maillard

I don't know. I don't care. I'm not getting rid of it.

42:20 Stephen Brown

Yeah, exactly. That's one of the challenges though. Knowing where your position is with the customer is really important. Are you a nice to have, or are you a Netflix where you're like, well, that sucks, but I've still got to see my, I don't know what the hottest show is on there right now.

42:41 Lauren Maillard

I should know, but I don't, because I'm not going to get rid of it.

42:47 Lauren Maillard

But I will say, Stephen, when we're talking about not wanting to increase costs, one way you can really shoot yourself in the foot is by thinking, year over year, I'm not going to increase cost. You've got to do that in this kind of environment where you have inflation. You've got to do it consistently. Because if you don't, you're going to have to do a much bigger increase, and then your clients will really feel it, rather than being consistent and doing it at a smaller percentage.

43:18 Stephen Brown

Yeah. And I think we had such a long era of very low inflation rates that it was easy to hold prices steady for years on end. And if you haven't learned that lesson, to incrementally increase prices, to do price testing.

I mean, there is a theory out there of hold prices and let the competition die. But that only works if you have a really unique product that doesn't have great alternatives. Or maybe it's the opposite, maybe you're not unique. I think if you're unique, you have more power to price. But if you're just playing a downward game.

And I think we're moving into an era where brand and financial discipline are so critical.

44:15 Lauren Maillard

What would you recommend when we're saying brand is critical? What does that look like?

44:24 Stephen Brown

Every brand is different. I think brand is that experience. It's not just your logo, it's not just your name. It's kind of the total experience a customer has with a company. It's the checkout process, your store, your product experience.

I do think we were in an era of luxury where people are thinking, how am I going to do all this fancy packaging?

I mean, let me ask you, there are probably more women that do ecommerce than men. How important is the unboxing and the packaging experience for you with online sales?

45:16 Lauren Maillard

I'm not sure if I'm the norm. I actually find it really, really annoying. And when things come in a super nice box that I then have to throw out, it annoys me.

And it might be because I think even things that aren't that expensive, it used to be, if you're going to go and buy a Hermès purse and spend $20,000, yeah, you're going to have the unboxing.

45:42 Stephen Brown

You're probably not going to do that online though. I don't know, maybe you do.

45:46 Lauren Maillard

Well, you actually do. There are some handbags you can't buy because you have to have this history. I mean, it's a whole other episode. But you can go on The RealReal and you can buy it.

But I do think that it has really gone down. It's all over that you see this luxury packaging, and it's just so wasteful that it annoys me.

46:00 Stephen Brown

Yeah, I think that's an area you can really look at, what's your packaging, what's your experience.

But coming back to your question, what would I do? I mean, brand is not something you can flip a switch on, it's done over a long period of time. Pricing, price analysis you can do. Cost analysis and cutting you can do fairly quickly. Changing your manufacturing costs takes time. Changing your shipping and fulfillment costs takes a little bit of time, but it's something you can do.

46:40 Stephen Brown

And I like to think of it this way. Like I said, I got my start in the dot-com days, and it was kind of free range and people were going crazy, starting companies. It was a little different. Ecommerce is more rooted in actual profit economics. Back then it wasn't, it was more in what could I raise economics. It's just like, I'm getting lots of users and I'll figure out monetization later.

47:20 Stephen Brown

Ecommerce hasn't had that luxury. There have been a number of factors, low cost of capital, very efficient digital marketing, lower competition. And I think what we've transitioned to is a more mature phase of this industry, where you no longer can go to Alibaba, source the same product that everybody else can source, throw up a Shopify store, throw it on Amazon, and make a lot of money.

I think ecommerce is moving into an era of discipline and product value, product uniqueness. I still think it's a great industry, but we're moving to an era where you've got to level up your game. You're going to have to really understand what you're doing and the various disciplines to be successful.

48:06 Lauren Maillard

You've got to be a little bit more sophisticated and thoughtful in your processes and systems and how you're managing things.

You talked about price testing. Have you ever done that on Shopify?

48:23 Stephen Brown

We use a tool called Fermat that has some price testing capabilities. So yeah, and there are a lot of tools out there, and it's time to learn how they do it and learn what the data is telling you.

48:35 Lauren Maillard

How long does that usually take you to do?

48:38 Stephen Brown

My partner's been more involved with that. That's on our list of things to go over.

The theoretical price testing is, I sell a product at one price, how many sales do I get? I sell it at another price, how many sales do I get? And there's some relatively simple math to come up with an optimal price point. And so that's something that I think price discipline and focus is going to have to be added to the list.

49:20 Stephen Brown

So let's kind of wrap up with our respective takes. What are you thinking about the end of the year? Is it going to be a good selling season? I mean, I guess we're kind of talking as consumers. Do you think we're going to have a good second half of the year? This is where retail makes all its money.

49:35 Lauren Maillard

Well, I think it will. We're in the middle of Prime Day. And what I heard is that it's going to be the equivalent of two Black Fridays. And I think that bodes well for the fall. I think things are going to improve. People are going to, I won't say get more comfortable with the tariffs, but they will have figured out what their strategy is going to be, and will have had time to adjust if their strategy doesn't work out.

49:55 Stephen Brown

And my pick is it's going to be kind of an okay season. I think the big beautiful bill has enough stimulus in it to at least help us this year. We'll see how next year plays out. So I'm going to say it's going to be an okay season.

But it's hard to use the first half of this year, because I think we've had a lot of sales being pulled forward. A lot of consumers, they were like, prices are going up, so they're buying, buying, buying. The question is, will they keep buying at these higher prices? I think they will, but maybe not at a crazy level. So we'll see.

50:37 Lauren Maillard

Yeah, we'll see what it brings.

50:39 Stephen Brown

All right, well thank you for joining me on this comeback episode of the Ecommerce Finance Podcast. If you've enjoyed it, subscribe, and we will be kicking out episodes once again to talk about all things ecommerce, finance and money.

50:56 Lauren Maillard

And if you didn't enjoy it, subscribe still. There you go.

50:59 Stephen Brown

Exactly.