Podcast 12: Sam Gastro and MyGiftCardSupply.com — A Million Dollar Retailer Case Study

Drew:  Hey, everybody. Welcome to the Nerd Marketing Podcast. This is Drew Sanocki and we are talking about growing a company to seven figures, which is a really popular topic on my blog, and today I am joined by Sam Gastro. Sam, among many things he works on, one is Mygiftcardsupply.com, which is a business that he took from zero to over a million in revenue in a short amount of time. Sam, welcome.

Sam: Hey, Drew. Thanks for having me.

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Drew:  Sure. Thanks for being here. Sam is in Boulder, Colorado. Congratulations on the Super Bowl.

Sam: Thank you, thank you.

Drew:  Yeah, I was a little bit bummed because I was a New England Patriots fan. I’m from Boston, and I’ve got to say that was … the Patriots gave them a better game both games than they had in the Super Bowl.

Sam: Agreed, agreed. Yeah, I can’t complain. It was a great … it was a really fun year to watch football.

Drew: Yeah, because everybody was sort of counting out, you know, the Broncos, because they weren’t winning by … they weren’t dominating, you know, but they were winning by like a field goal, and Manning was like … you know, he kind of was like me. He’s like 40-something, like falling down, right, like slowly get up, injured all the time, right, like me trying to throw 50 yards. It was a good way to go out, right?

Sam:  Incredible, absolutely insane. Yeah, during the middle of the season there, it was kind of wild with him like getting replaced, and it was like … just a wild, wild year, but completely fun.

Drew:  Congratulations. It would be great to talk about the Super Bowl for like 90 percent of this podcast and then we’ll just touch on your retailer.

Sam: Yeah, let’s do that, essentially because I don’t know a whole lot about football. I like it. I like to watch it. Usually I’m in it for the guacamole and the home team.

Drew: Well, let’s see. I don’t know what the transition is from Super Bowl to Mygiftcardsupply.com, but did you see a spike in revenue during the Super Bowl? How about that?

Sam: No, we did not. There isn’t … not a whole lot of football and gift card correlation, unfortunately.

Drew:  For those who don’t know Mygiftcardsupply.com, could you give a little bit of a background on the site, how you decided to start it, how long ago did you start it?

Sam: Absolutely, yeah. I started it about four years ago, and I kind of stumbled upon the idea by selling a gift card on eBay. Basically when I sold it, it went to a guy in France, and I was a little intrigued because with the currency conversion, it went over what the actual value of the gift card was. I won’t get into the numbers of it, but basically what I found after talking to him … because I was first suspicious and I messaged him … he explained that there’s a large demand for United States gift cards, because people like to buy U.S. content and there’s kind of a barrier. You have to use a U.S. gift card if you want to buy an album or some movies that only get released in the U.S.

Drew: Wow.

Sam: Yeah, so it’s kind of an interesting niche, and it kind of works both ways, and every country has this going on in their respective markets. For instance, Japan, they have a big anime scene, and so a lot of people will buy Japanese gift cards so they can buy the anime that’s only released in the country. Otherwise, there isn’t like the distribution network or the content available.

It’s kind of this niche that I stumbled just over an eBay transaction, that I just never expected, and I just kind of dug a little deeper to ask a few questions. When I saw that this had some more demand to it, I kind of let one thing lead to another, and that’s kind of how I got the spark and I kind of took it from there.

Drew: This is why you have the “Select Language” dropdown on the top of your site, which has everything from Slovak to Zulu.

Sam: Yeah, which surprisingly isn’t used a whole lot.

Drew: Zulu, or the language dropdown?

Sam: Well, Zulu, yeah, but no, the language thing wasn’t being used a lot, and we couldn’t figure this out. It turns out, Google has a blog called “Thoughts with Google,” I think it is, and if anybody listening is in the multilingual marketplace, they did a really great report. I think it may have been just Spanish speakers, but basically bilingual visitors to your site, if they know English, they’d prefer … even if it isn’t their first language … they’d prefer to consume and read the content in English. There were some really good insights on that, and that kind of justified, well, that’s why they’re not using the language translation.

Drew:  Your analytics tell you that people are coming there from all over the place?

Sam: Yeah, absolutely.

Drew:  Got it. Got it. You built the site, is it … what are you running for an e-commerce platform?

Sam: We are currently on Bigcommerce, but we are currently migrating over to WooCommerce, which hopefully we’re going to launch the new site maybe as early as tomorrow, but we’re very close to launching on Wu Commerce.

Drew: Got it. Who’s we?

Sam:  I say we because I have a team, an amazing group of people that help me with it, a couple of developers and then a group of three for customer support, and they’re all …

Drew: Contractors?

Sam: Full-time. Full-time developer. Everyone’s full-time except for my front-end designer, who I hope to hire full-time within a month or so. I just can’t afford him right now.

Drew: Sure, and they are all in Boulder or are they all over the place?

Sam: The front-end designer’s in Boulder. My back-end guy was here in town. That’s how we got intelligible.. He was in town for an accelerator but he was from Pakistan, and there were some issues with his visa so he had to go back. We hope that he’ll be back in Boulder this summer. Then the customer support team is in Bangladesh.

Drew: Wow, awesome. A totally lean team.

Sam:  Very, very lean, yeah.

Drew: Yeah. You can scale up or down.

Sam:  Yeah.

Drew: I imagine customer service is relatively easy, because you’re not … you know, I sold something like 50,000 different SKUs, from lamps to rugs.

Sam:  Oh, my gosh, yeah.

Drew: You were like, gift cards.

Sam: You know, I guess it always … you feel like you’re in a tornado sometimes in customer service, but if you put it relative to something like that, it can make you appreciate maybe some simplicities.

Drew: Basically you saw this, you got a little bit of insight into the market through this eBay traction, and what happened next? You built the site out, and how did you get your first ten, hundred customers?

Sam: What we did first was we were like, “Well, let’s just keep this eBay thing going,” so we did a couple of listings and we let that go for about a month or so. What we realized after about a month was the margin of legitimate people that buy gift cards on eBay are very slim, and the bulk of them are scammers. What we found after about a couple months in was that we lost our ass, because we had so many disputes and so many refunds that they all kind of came back to us.

Drew: Was like your one legitimate customer that one French guy?

Sam: Pretty much, yeah. It was like literally like he brought like three of his friends. Actually for a minute, we were like, “Well, we can only trust the French.”

Drew:  Then you thought you could only trust this one French guy, yeah.

Sam: This is the only guy. We’re going to build our whole e-commerce around this one guy. That was an interesting time, because basically our first couple months, we look and we’re like, “Oh, my God.” We just lost everything, because the margin is thin. The losses are big when someone does like a refund on a particular card that you … so kind of to make the profit for that one card, you know.

That was like a little bit of tribulation in the beginning, which I think every entrepreneur has at some point. There’s going to be a crux of like, “Okay, this is too hard, or this isn’t working or I don’t have the stomach for this,” or whatever, you know, but we were able to be kind of like, “okay, well, is there a way out of this? What angles can we take?” That was when we were like, “Well, if we had a little more control,” and I really didn’t know e-commerce. I didn’t know what Shopify was. I didn’t know what any of these platforms were. X-Cart was kind of big at the time.

I started doing some research and I was like, “Well, what if we host our own site,” because the problem with eBay was that we just didn’t have enough info on the customers to kind of determine. We only had their eBay username and profile, so that was what led us to e-commerce. We were like, “Well, if we’re going to have our own e-commerce, we can see IP, we can see traffic source. We can have a little bit more control over the billing, stuff like that.” That was what led us to transition to e-commerce. Then once we had that set up, then it was kind of greener pastures a little bit, although fraud was still and still is today very much an issue.

Drew: I’ll bet.

Sam: It’s just so much more manageable when you have control of more of the ecosystem.

Drew: Do you ever have like half of Russia trying to launder money through gift cards?

Sam:  It comes in waves. I mean, you know, right now, I don’t know why Italy, but we’re getting just pummeled by Italy right now.

Drew: What the hell?

Sam: It comes in waves. Argentina was another country that we’re currently having problems with, and you kind of get blindsided. This is just something that we’re continually trying to work on, and as anyone in the fraud niche knows, it’s very … it changes so rapidly. That’s what we’re learning right now, is that maybe Argentina was a safe country for the last 12 months, that doesn’t mean this week’s going to be a good week.

Drew:  Any country where the economy’s collapsing, they put all their money in gift cards. You guys should sell big-time. Just to get back to our story, you go direct to consumer. You build out your site, your branded site, and then how are you acquiring customers? How does the jump from zero to a million happen?

Sam: That, so the first 100 customers, it was just strictly guerrilla marketing. We were kind of just trying to figure out where can we reach out to our customers. Essentially we had come from eBay and we knew that they were our good customers on there. We were actually just sending people messages directly, that we were just … we found a way to do the search and we could find out if they’d bought a gift card before, and we were just, one by one, hand-writing messages saying, “Come check us out.” That was how the first few trickled in, and that was super-exciting.

Drew: Everybody’s always looking for a silver bullet, but I think for most companies it’s doing things that don’t scale in the early days.

Sam:  You have to, and that was the absolute ticket. Then we literally just took that same model and then we went to forums with it. I mean, forums are becoming increasingly tight, so we had to just be on there and we had to establish some credibility. We just talked to people, so it was very much just kind of going out and finding new customers, literally one by one. We did that for I want to say the first year. That’s how I originally teamed up with my friend and partner in Bangladesh, who basically him and I were in the trenches, you know.

Drew:  Yep. Did you ever consider putting the forums on your own site?

Sam: Yes, actually. I’m kind of in between doing like a forum and potentially like a Facebook group as well.

Drew: Ah, cool. You did a lot of things that don’t scale in the early days, like reaching out, trying to identify these repeat purchasers on eBay. Get the French guy over, move them all over to Mygiftcardsupply.com, but still I’m guessing that that doesn’t get you all the way to seven figures, at least over … you know, that probably gets you initial traction, and then how did you go from there to something where you don’t have to do that all the time?

Sam:  Yeah, I think that what we did was we continued to do that for way longer than was justifiable, just because it was working and nobody else was doing it, no one else was willing to do it. Then after that, once we had the customers, then it really became about retention and then enticing those people to talk to their friends and family. There was a lot of that, which really multiplied our efforts in the first part, but that was also kind of hard to scale up but much easier, because you could send out like referral incentives and stuff like that. That was the next big push, which was, “Okay, now we have an established 500 customers or so, how can we get these guys to tell a friend or two?”

Drew: That’s really cool. This is sort of a retention marketer’s dream. You know, everybody always talks about traffic and conversion, traffic and conversion. Like, “We need more traffic to grow,” but you kind of came at it the other way and found these influencers, and were able to think of ways to just have them come back, number one, and then have them tell their friends, number two.

Sam:  Absolutely, yeah.

Drew:  What I was going to ask, was email key to that, or did you find … so what became one of your dominant marketing channels?

Sam: Yeah, everything was over email. Being a multicultural customer base, video is only so-so and phones are kind of out of the question, just because talking with someone on the other side of the world via VoIP is miserable sometimes. I really envy those businesses that can pick up the phone and call their customer and win them over through a phone call, just kind of asking them how they’re doing and actually, you know, caring. For us it was all email, so we really had to make that count and just … and it was one by one, and it still is.

Actually we went through a phase where we stopped doing it because there were other things to manage and there were bigger fish to fry, but I’m starting to go back to that one-by-one email of writing. I spent a couple weeks last month just trying this out, but I’m going to email every single new customer that comes in and make it personal, like where they’re from, and I ask … I don’t know, something silly like, “I hope things are great in Singapore,” trying to make some kind of local reference, you know, so I let them know that I’m actually writing, I’m taking the time to care about them.

Drew: Yeah. Tell some joke about the local Zulu tribesmen, right, the local chief. “Do you believe what this guy said last week?” I mean, how many customers are we … you do individual …

Sam: Well, I love it, because all I talk about is retention on my blog, but you’re actually doing it like one-to-one.

Drew: Yeah, absolutely. What kind of volume are we talking about? Like how many orders a day do you get.? You don’t have to give the exact number, but is it hundreds?

Sam: It’s hundreds, yeah. I was just trying this out, because I think before you kind of put it into place for your team to execute on, I wanted to kind of try it out and see, learn how it would work, you know, and I just dabbled for a couple of weeks. I would dedicate like days here and there, and my girlfriend is awesome and she actually helps a lot. We just kind of looked at it and, man, we noticed a big spike in sales, and there was like … it’s twofold.

I think people are more enticed to come back to you, and I think people are more enticed to tell their friends and family when they have that just kind of special experience that is outside of the norm of an Internet transaction, where it’s just you get your automated receipt and then you get the product, and there isn’t that one-on-one interaction that we get when we kind of have invested or something.

Drew:  Yeah. A little bit of background for those listening, for those five people listening to this podcast, Sam and I met at eCommerceFuel Live, and I was talking about segmentation and targeting and basically you’ve got good customers and bad customers, and if you can identify the good ones and keep them buying, you basically treat them differently and you build your business around the good customers. Part of that is any business has these MVPs, the 20 percent that drive 80 percent of the revenue. What are you going to do to treat them differently? In Sam’s case, personal emails sound like the way to go.

Sam: Absolutely. Roll the red carpet out.

Drew: Yeah, because this … I would guess that you have something like your best customers must order, you know, ten, twenty times what the average customer orders.

Sam: Oh, yeah. Yeah. It’s the most important thing. I mean, I think it’s really easy to get caught up in how many Twitter followers you have or how many likes you have on your Instagram photo. A lot of these things just are … they’re so secondary to who’s actually giving the money to your business, and those are the people to actually spend the time on. If you’re going to do anything, one thing at all, it’s to give love to those who are supporting you and your business.

Drew: Which it’s just interesting to see it at your business, because I’m used to people saying that who run apparel brands or design brands, where it’s like they really care about their brand and the emotional appeal of this product. You’re selling like a gift card, an iTunes gift card, so I don’t know if people have an emotional attachment to one source of gift cards over the other. I would guess that it’s low, but you’re proving otherwise, that you still need that trust, because the way you described it, it’s almost an arbitrage play.

Sam: It is.

Drew: The customers buy these things because they want to make purchases, and so they can … I want to say it’s almost like a commodity, right?

Sam: Absolutely.

Drew: They could buy this iTunes gift card from a million places, right?

Sam: Yeah, yeah. It’s interesting, right. It absolutely is a commodity. This is my first business, and it’s really been where I’ve spend most of my time working. I’ve done some stuff before this, but this is really the only thing I know, and there isn’t like a big emotional attachment to it like some other businesses. I would imagine … and that seems really appealing to me. I’m envious of those people who have businesses where people can become emotionally attached to it, because I think that would be really fun. Maybe it’s even more important if you have like a commodity, where if somebody doesn’t have anything to fall in love with, then they’ll just Google-search the next time and go to whoever they land on, you know?

It’s very interesting, but I think that I plan on starting another e-commerce site a little later this year or in the summer of this year that will be not such a commodity, but it’ll be interesting to see how that plays out. I tend to take the same thing of just really giving that one-on-one, red carpet, try to show them that you care and really engage with them.

Drew:  Yeah. I’m guessing, just thinking about the product, you probably don’t have a big margin on a gift card, so that rules out a lot of paid acquisition right there. Naturally, you built a $1 million-plus retailer off the back of retention on a commodity product, by really just treating your customers well.

Sam: Yeah.

Drew: It’s really a great case study. I mean, if you can do it for gift cards, imagine what you could do if you were selling men’s suits or women’s dresses or something like that.

Sam: Yeah. People are always going to take to it well. You’re really going to stand out, because it’s just not being done. If you think about how many purchases you make on the Internet and how much that actually translates to some kind of interaction, personalized, it’s almost zero, you know? If you really go and take that extra step, you’re going to stand out a ton.

Drew: Are you automating any of these email follow-ups?

Sam: We do have timed follow-ups that we have kind of deemed relevant to the product that they purchased. For instance, like Hulu cards and some of these are subscription-based, so we can set up timers that come as more reminders, and we find them pretty well … so they’ve gotten pretty good reception. People say, “Oh, thanks for reminding me,” you know. For that we’ve been using InfusionSoft, which was really good, but we’ve recently switched to Avio and I’ve been extremely happy with that system.

Drew: Yeah, a little bit more made for e-commerce.

Sam: Absolutely, yeah.

Drew: Rejoiner, ActiveCampaign, dotmailer, those are other ones that I think people should consider. They’re all, like you said, a great way to trigger emails based off of purchase activity.

Sam:  Yeah, absolutely.

Drew: Well, Sam, it’s been great talking to you. I have one final question, and that is what would you tell the listeners, the five listeners to this podcast? What’s one actionable thing that they could use to grow their businesses?

Sam: Sure. I think the most important thing is figuring out what the most important thing is. The process that I use for this is I take out a piece of paper … I learned this about a year ago or so. I take out a piece of paper, and I write down everything that I think that I can do for my business that can make a difference to it, that can actually move the needle. You kind of get those all written out, and what you do is you circle one thing that you think is the most important after you look at all those.

Then you literally just scrap everything else on the list. You don’t even think of them as secondary. This kind of a thing that you can commonly do is think of this is not a to-do list, but it’s not just scratch everything, right, and only execute on that one, single, solitary thing until it’s complete. That’s what I’d say. I’d say it’s just finding what’s most important and not really looking at anything else.

Drew: That’s great, yeah. I’m reminded of the book “The One Thing” by Gary Keller, which I loved. Same idea. I think Warren Buffett talks a lot about creating two lists, like a list that you want to do and a list that you don’t want to do, and the idea is, you know, put as many things as you can on that not-to-do list, and don’t even attempt to do them.

Sam: I like that.

Drew: Yeah. Well, that’s great. What’s the one thing for you right now?

Sam:  The one thing for us is building out a really good team. I hired the back-end developer in the fall and we hope to get the front-end guy onboard full-time in the next month or so. For me, it’s just filling out a team. Most of our growth has just been with me and the customer support group, so the biggest thing right now is to get a team, get ready to scale for the next level, and then also have an executable team that we can go on and tackle other projects with.

Drew: I love it. Well, Sam, thanks for taking time to share your story with us.

Sam: Oh, thanks for having me.

Drew: Yeah, it was really inspiring to hear about a business that’s grown off the back of retention like yours has.

Sam:  Yeah, it’s been a blast. I just fell in love with the whole project.

Drew:  Great, and that wraps up the podcast. I’ll put a link to your site in the Show Notes, for anyone who wants to check out Sam’s site, but also, if it’s okay with you, Sam, put your contact information there.

Sam: Yeah.

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Drew: That’s about it for this episode of the Nerd Marketing Podcast. Sam, thanks again, and I’ll talk to everybody next week.