Listen: Modern Merchant Podcast EP 1 – Firearms Industry Roundup

Austin Rose:

All right. Hey everyone. Thanks for joining The Modern Merchant Podcast. My name is Austin Rose. I’m the partners manager here at Flxpoint inventory source and US Direct. I’m super excited about this podcast episode that we’ve got coming out today. What we’re doing today is we’re going to be talking about a specific industry that we service very highly, have a lot of customers and partners in it. We’re going to be talking about firearms and firearm accessories. My guest here today is Eric at 2nd Amendment Wholesale. They’re actually one of our distributor and supplier partners that we’ve been partners with for a very long time and have a wonderful relationship and partnership with. And yeah, we’re super excited about this going. I got Eric here. Eric, thanks for joining me. How are you doing today?

Eric:

Doing well, thanks for having me on the call today, Austin.

Austin Rose:

Yeah, absolutely. Absolutely. And yeah to get us started, why don’t you just give us a quick little breakdown about 2AW, what you’re currently doing for the company, where you guys started, how you started with the company and just everything that goes into play with the business.

Eric:

Sure. I’d love to go ahead and expand on that. So 2nd Amendment Wholesale’s been around, being a company for four or five years actively operating and servicing dealers for a little over three years now. And I came from the firearms industry previously. So I have a lot of experiences on the boots on the ground, if you will, as an online retailer and also as a buyer. So I’ve got good experience in the industry with market trends, this, that and the other. I’m currently the CEO and buyer for our company. So I’m the one that sources all the inventory and decides what to offer our dealers. And that’s really our number one selling point as a wholesale distributor to dealers is our inventory is much different than what you would find at a traditional firearm wholesale distributor. And by different, I mean, we’re trying to go for trendsetting inventory. Inventory from new brands that have high potential, high profit margins, where some of the larger distributors are slow to move.

Eric:

They won’t pick up the smaller brands, or if they do, they’ll only do it for a year, a year and a half after that brand has already had success. But as everyone knows in the retail industry, you’re going to lose out on the best profit margin of that product life cycle by missing out on the first year or two of the main popularity when that item is at maximum basically scarcity essentially. So we specialize in that and we do have some mainstream brands as well that mainstream firearm brands as well in our selection. But we try to find a niche in the market where we’re going to be in stock on different SKUs from the main brands, maybe distributor exclusives that the other distributors aren’t going to have.

Eric:

And yeah, mainly just listening to our customers and trying to be agile. We have a lot less dealers than some of the other wholesale distributors too. So one of the big things that’s coming up in our industry is obviously it’s based on the election cycles and it’s really highly dependent on things other than actual normal circumstances like the pandemic, for example, we’ll talk about later in the call. The election cycles really influence the demand in our industry, and we’ve got a lot less dealers. So we were able to allocate that product and the rare product that’s hard to get, or if not impossible to get for a smaller dealer at a larger distributor. You often can find us sometimes even just sitting in stock, ready to check out through our site.

Austin Rose:

Yeah. Yeah. And that’s actually really interesting that you brought that up because that’s something that we hear a lot about is the margins specifically on just kind of like your normal 870 Remington or something like that. Right. It’s crazy that we have retailers that are selling products that are thousands and thousands of dollars and the margins are just unbelievably low. And that’s something that we hear all the time with our customers and obviously us being a SaaS company where a lot of these other SaaS companies do GMV kind of for how they bill and what their plans are. And we’ve seen the order volume side of things, not necessarily the dollar amount has been kind of the key for a lot of these firearm dealers. And that’s really cool that you brought that up. I always knew the … or I went to y’alls website and I know your products and just like these brand new brands I’ve never seen some crazy accessory or what was the flame servers that we saw and like some [crosstalk 00:04:52].

Eric:

Yeah. Well, that’s my personal favorite. I was going to … We definitely can’t go through this call without mentioning the flamethrowers. But that’s a perfect example of something that a larger conservative distributor may not touch just unbiased, unreasonable, unreasoned fear basically. It may be a scary product. Oh, it’s a flame thrower. Well, you shouldn’t be scared of it because you’re going to make four times more margin selling a flame thrower than you would a firearm. And those are the kinds of things … That’s a perfect example of the kind of product types we like to bring in at 2nd Amendment Wholesale. Another example is the gear head works pistol braces, for example. We were the first and only wholesale distributor for that pistol brace brand. The tail hook is what they call it.

Eric:

And we essentially helped build their brand up from a relatively small parts unknown manufacturer to arguably the second largest and second most popular pistol brace, if not the highest, most popular based on quality in some people’s opinion. But as far as brand name recognizability, probably number two right now in the industry, honestly. And other wholesale distributors have followed in our footsteps and two other wholesale distributors have picked up the line after us. So that’s just a good kind of example. Also we won Franklin Armory distributor of the year of 2019. So we’re certainly not the largest distributor, but when we find a brand that has good profit margin for our dealers, we push it and we push it hard and that helps them as well as us. And I didn’t even realize this, but we actually did the highest volume total revenue for that brand. And I just figured that we were maybe their favorites or something. Right. But they told me that we actually beat out the bigger wholesale distributors on that particular brand for sales. So that’s the award sitting on the wall over there.

Austin Rose:

I see that back there. I recognize that award because I believe we were right next to you guys when you got that in Vegas at SHOT show which was a great time of course with you guys hanging out inside the show and outside of the show.

Eric:

That’s right. Venetian bars, circle bars where all the deals are done.

Austin Rose:

Venetian bar that’s right. And a lot of interesting conversations. That’s for sure. You’re not wrong on all the deals.

Eric:

Yeah. One of our largest dealers is getting on board with Flxpoint and he’s basically going to expand his inventory and that’s one of the things I wanted to talk about that was on your list of questions today is we want to talk about the pandemic. And what I think dealers should be doing now is the time where you have to really evaluate your efficiencies as a business. And we’re doing the same on our end as a wholesale distributor. Just because if you don’t, if you don’t constantly improve on all these small things that you’re doing on a day to day basis, you’re just going to get more and more behind on whether it be orders, shipping, answering emails, answering phone calls.

Eric:

So thankfully, there’s multiple ways to improve your efficiencies and try to evaluate your business process during this pandemic. One of which that I’ve recommended to dealers is, hey, you could hire more employees and that’s a fine solution, but we don’t know how long the sales are going to continue. There might be a small lull during the summer just because there normally is a small lull in the summer for a business in the firearms industry. So you don’t want to be hiring a bunch of people, spending all this time training them and all of a sudden the industry slows down and you have to lay all these people you spent a lot of time and money training off. And if you can’t keep them employed up through the lead up to the election.

Eric:

So I’ve actually been recommending dealers to try to do what we’ve been doing, which is we’ve been trying to expand our inventory selection because a lot of our regular suppliers have been running out of everything. And running out of the best SKUs and the stuff they have left are like the scraps. For example, a shotgun manufacturer that typically has small firearms with the pistol grip and the arm braces, they’re pretty much out of those all the time. Well, yeah, I could go ahead and stock up on side-by-sides and over and unders from them. But what we’re doing instead is we’re broadening our brand selection to try to find other brands that are similar, that have inventory that haven’t quite seen as much of the wave of demand increase, just because they’re smaller or they’re newer.

Eric:

So that’s actually one of the things I’ve been recommending to our retailers is, hey, now is a time to broaden your selection, broaden the assortment of products you’re selling. So that way you’re not just selling stuff you have on hand. And one of the best ways to do it is to improve your website or start building a website now so you have it to take advantage of the two months leading up to the election this year that are just going to be absolutely crazy. And you can probably talk a little bit more about the options to integrate with inventory of the distributors and whatnot, but I know we’re set up through Flxpoint and then two or three of our biggest dealers are using that already. And it’s, I mean, one of our dealers that set up on Flxpoint used to email us orders. Like they would send an email and say, hey, ship this thing here.

Eric:

Well, as you can imagine, that was impossible to keep track of. If we missed an email, the order never got entered into our system, whereas with Flxpoint, all their orders come in in a big long list. So if we miss entering one in, it’s still there. It doesn’t disappear. It’s still in the UI and the tracking will automatically route back to their system. And that was another big problem that we had in the past with one of our larger dealers. So I’m telling dealers get your stuff ready and get set up properly with your online selling, even if you only have a brick and mortar, because you’re going to want this stuff to be automated integrated now to save you time now, and then also to be able to keep selling when it picks up again in the fall.

Austin Rose:

Yeah. Yeah. And you bring up a good point because we’ve got you guys utilizing Flxpoint obviously as more of a partner handling the B2B side of things. You’re obviously, you’re selling to a network of retailers. And it’s also interesting because we’re servicing on the exact same UI, the exact same platform. One of your retailers that’s just selling to consumers. They’re not selling to a network, they’re selling directly to consumers. And obviously that’s the reason why Flxpoint is so flexible, obviously pun intended, but that we service both B2B and B2C customers, retailers, sellers, what may have you. But you bring up a good point too, kind of in that regard of how COVID has been affecting you guys versus how it’s been affecting retailers.

Austin Rose:

And it’s so interesting because it’s like, I feel like it’s just completely polar opposites. Retailers are getting an unbelievable amount of business. Obviously everybody’s buying online now. And obviously with the pandemic and being in the firearm and firearm accessories, and let me pull up a graph that I have here as well is just due to any type of pandemic or as you can see here, when Obama got elected or the Sandy Hook shooting, things like that, a lot of these things kind of trigger, I got to get in. I got to buy it. I wanted this firearm or I needed to buy this or ammo or what may have you. And obviously retailers have been absolutely crushing it.

Austin Rose:

We feel like we’ve been getting a lot of businesses and we’ve been talking to a lot of our customers and it’s great. But then we also have and you guys aren’t in this boat, but we have other suppliers and other distributors that have been closed. And they’re just now finally starting to get open. So it’s like this huge demand and need on one side. And then the other side it’s like to get those products are just like nope, doors closed. We can’t operate. So it’s been interesting. It’s been just super great for retailers. And then for some distributors, it’s just been like, oh my gosh, I can’t believe we had to close up shop because of this pandemic. So it’s been an interesting time that’s for sure.

Eric:

Definitely. I mean, it’s honestly been depending on your products channel or what type of products you carry and what type of business you are during the pandemic, it’s really been essentially a feast or famine. I mean, the restaurant industry I’m sure is just torn up and thankfully yeah, our retailers have been doing great reordering buying goods. I mean, we’ve had to respond to that. I mean, our ammunition orders went from one truck to like two trucks every week basically. I mean, so we cloud 3X or 4X our ammo ordering. And then even then that’s barely enough on the popular SKUs. We’re not getting enough of it. And that’s we’re basically ordering to the max capacity that our suppliers will even allow and that they can even fulfill our orders and it’s still not enough.

Eric:

So I mean, you bring a good point. The retailer is … It’s a good time to be a retailer and it’s easy to make sales. You’re not having customers coming in the store and tire kick and see a gun they want and just go, “Oh. I’ll think about it.” I’m sure they’re just buying it, which is a relief. But I guess I would say use the extra money and profit you have and time now, if you have any extra time. Of course you probably don’t, but use the extra money I think to invest as a retailer into your systems, into your website, into your e-commerce because the election like you pointed out here, the 2 million guns spike in 2013 looks like where Obama’s reelection and obviously slightly after at the end of 2012.

Eric:

Trump could get reelected as well of course, which is a possibility. And if that happens, we can expect probably the opposite of what’s happening right now. Gun sales are going to slide. People are no longer going to be worried about their AR-15s getting banned. And instead of buying another AR-15 and a couple of cases of ammo, they’re going to put that money aside to fix the roof in six months. So really the retailers that are going to survive in a Trump win are ones that spend the investment and the time into optimizing their online sales, as well as getting more efficient while they have the capital to do so.

Austin Rose:

Yeah. That’s a great point. You’re almost, obviously it’s safe to assume some of these guys would be happy with that win. Right. But [crosstalk 00:15:35].

Eric:

Yeah, I mean, everyone would be honestly in the industry, but yeah.

Austin Rose:

Yeah. But when you think about it, it might affect their business in a bad way. Right.

Eric:

Exactly. I mean, it’s going to be an … it’s like Darwinism obviously, survival of the fittest, right. That’s going to be a bigger factor and businesses will just … the margins will go back to the tiny margins like you were talking about earlier in the call on the 870 shotguns. A lot of smaller retailers will just realize, hey, I might as well be selling tennis shoes instead of selling a shotgun for 3% margin because that’s basically how it was last year. It was pretty tight. Like you were talking about, you wanted to talk a little bit about 2019, how it compared to this year and the margins were slim a year from now.

Eric:

And then the summer of last year, I can remember we had to run a nice summer sale to get some revenue in. And I was looking at some of those prices in our e-commerce system updating them as we got new stock and I couldn’t believe some of the sale prices we had last summer. It was just so low. It’s like shocking that … and that’s what we needed to sell them for to move them out the door to get dealers to buy them. So it’s changed a lot and it’ll constantly change every single month leading up to the election and now is not too long to think. I mean, it’s going to be four months from now already, so it’s coming up quick or I guess six months, but-

Austin Rose:

Yeah. Well, and it’s almost like it’s funny because I feel like I talked to you about this and I also, it wouldn’t surprise me how many people I talked to about this when we were at SHOT show a couple of months ago, was the firearm industry just being one of the last markets to fully capture being online. Right. And it’s funny because if people didn’t get the gist a few months ago now, I’m sure they’re feeling it or they’re understanding like, wow, we need to get online. I mean, it’s just like everybody working from home. Right. We’re starting to see companies not being able to be productive and sustain everything with this whole work from home order unlike a software company, which is why we could do it anytime. But there are companies out there that they’re starting to reevaluate just their business in general when things like this happen.

Austin Rose:

And I bet this is a nice little kick in the butt for the firearm industry of like, wow, we need to get online. And I think that’s the reason why we’ve seen a huge uptake with us is a lot of these brick and mortar stores, they need solutions to get online. And you brought a good point up earlier when we were chatting is the old school way of things are just slowly going away. And these new guys are coming in, younger CEOs, young business owners that are like “Yeah, if you don’t have an online presence, I mean, what are you doing?”

Eric:

Exactly. I mean, and one thing I was going to just mention before I forgot, the ability to sell online is just so key because of time efficiency essentially as a retailer. I mean, even when you have people in the store who are not tire kicking, I mean, look at how even the gun shops that were able to stay open, some of their states are requiring them to only have like two customers in the store at a time for example. I mean, how do you get the maximum on sales as a retailer if you could only have two people in the store at a time? I mean, you really should be having your online sales come pick up the gun, you do the background check thing, bang, bang, bang, bang. You could sell a gun every 10 minutes doing it that way.

Eric:

Whereas if you only have two people in the store, maybe you only sell one gun every 40 minutes. Right. So, I mean, it’s all going to come down to these small edges and whoever is able to execute on as many of these small edges are the companies that are going to survive if and when it does slow down. And even the ATF is kind of like chiming in on what they think as far as the background checks go. I don’t know if you saw, but there was a recent clarification that the ATF said that if you own the land that your parking lot is on, that you’re able to basically commence with the background check on that property outside the store. So like essentially you could have driven through background checks.

Austin Rose:

Drive through, really? Wow. Yeah. I didn’t actually know about that. That’s funny. That’s the next slide on here that we saw and I wanted to hit on with the background checks is like, you look at this one over here on the left. I mean the highest amount of total checks of days, there are 10, nine, five and four and one all in March of this year ever. Going all the way back to what, 2015. And then over here on the right, the same 10, nine, five, four and one of the weeks of the amount of background checks. And gosh, they got over a million in a week and it’s just, it’s not surprising. Well, the pandemic is surprising, this doesn’t surprise me because of everything going online. But obviously with the pandemic, I mean, even something pops in my head like, shoot, maybe I should go get that Glock that I was looking at or something like that.

Eric:

Exactly. Yeah. I mean, and I’ve heard dealers that still do their background checks by calling it in to NICS and I’ve heard like three hour hold times and stuff like that. So I mean, even that’s a good, simple example, not even related to Flxpoint. As a retailer, are you going to call in your background checks and wait on hold for three hours or are you going to try to get set up with the online system so you can be more optimized and not have to sit on hold for three hours?

Austin Rose:

Yeah. Yeah. Would you say that’s probably one of the …I would … one thing I wanted, that I didn’t really know I guess per se was not only like the background checks, but I feel like the legality of selling firearms is probably what would you say is the biggest barrier of entry for people wanting to start selling firearms?

Eric:

Yeah, for sure. I mean, honestly, the ATF essentially weeds out anyone who’s had any type of criminal history, significant criminal history during the application process to get your federal firearms license. So obviously to get your federal firearms license, you have to have no, same as you have to be able to own a gun, of course no felonies. So that is going to be the biggest barrier to entry. And it’s really just a waiting game for most people because of the paperwork and the timeframe that it takes from form submission to get your license to sell guns, to time you get it approved. That being said, it’s not like an overly complicated or difficult process. There are several websites that help assist with that process for a very small fee.

Eric:

I mean, we’re talking like less than a hundred bucks and you can basically get like a step by step on how to get your federal firearms license. But so there is a little bit of barrier to entry in that regard. But it also depends on how you decide to … and that once you get your license, then now that’s one phase. Then the second phase is okay, how do I legally sell a gun? Well, it’s sort of up to you on your business model that you choose. One of the business models that’s actually most popular right now with dealers that are smaller is they’ll set up these online e-commerce websites and they’ll hook them up to things like Flxpoint, which will integrate with 10 distributors. And then it represents all of that inventory from all 10 distributors onto their own website as in stock.

Eric:

And if they make a sale, they’ll actually query us to ship it directly to their customers, retail and FFL where they do the background check. So even though the retailer that’s basically making the sale, collecting the money and ordering the gun from us, like they won’t actually have a physical background check to fill out because it’ll be shipping directly to their customers FFL end store. So that saves a lot of time and paperwork on their end, and they don’t have to worry about making typos on the background checks and the 4473 forms. And it reduces the chance that you make a mistake and you get audited by the ATF and there are some problems. So a lot of businesses have been doing that and going to that type of business model.

Eric:

And there are some that are doing really well with it and there are some that are struggling with it. And we actually had one that has that business model and they were doing something weird with this order submission for us. And we just told them, “Hey, look, let’s just do it this way.” So oftentimes if you have your business process down to a T, that business model can work really well for retailers because how much money do you have to invest in inventory? Zero.

Austin Rose:

Zero, yep. And that’s-

Eric:

And you don’t have to have a single gun in your own retail warehouse to be able to do that type of business model. So that’s really attractive to someone who just gets their FFL is that’s probably your best route for success, to be honest.

Austin Rose:

Yeah. And that’s a conversation we have on a daily basis here too, because specifically with the brick and mortar is going online, right. That’s going to be an ever evolving thing and obviously the pandemic helped speed that up. But it’s also, you need to decide on what your business model you want to do online as well. You don’t have to sell firearms online. You could just be doing just accessories and you don’t have to worry about the I got to get this firearm sent to this FFL dealer that’s closest to where my customer lives and handling all that. And then really all that work, even though we help automate it, and a lot of people will try to automate this as much as possible, you’d still make a low margin on that firearm.

Austin Rose:

There may be some type of 511 boot that you could make some serious margin on or something like that. Some other types of brands, some accessories. And it’s funny, I wanted to bring this up too. This was super interesting to me. Ammo.com, obviously one of the biggest retailers out there selling ammunition. I mean, look at these percent increases on sales versus these different states. That is wild. Thousand plus percent because of the pandemic since February 23rd. I almost think if you’re a brick and mortar store and you’re wanting to get online, instead of trying to do both point of sale system, shipping out yourself from your warehouse and trying to do everything manual, like you said, hiring more people to just be the person packing and shipping, just start drop shipping.

Austin Rose:

Dropship with trusted distributors like yourself. Get an online store up, get a system like ours, or I don’t want to be biased, anybody else out there that does this and just automate it. And then the best part is if you put that foundation in place of, okay, I’ve got my website, looks good. There’s plenty of websites. Oh my gosh, I have so many stories of people that spend $20,000 just to design a website. And I’m sitting here scratching my head like you know you could have just bought like a big commerce store for $30 a month. It’s like one of those themes and it would have looked the exact same if not better. And people don’t realize like that’s the way to go.

Austin Rose:

Go get an online store, get that up and running, just put a free theme on. Don’t do anything crazy special. Don’t buy tens of thousands of dollars of some type of crazy expensive agency. And then get your distribution network, put that automation plot management right there in the middle in place to really help out and you’re good to go. All you have to do is worry about selling and just bringing in people to your website, which is a hard part. But-

Eric:

Yeah. Well, I mean, but you have some great advice there. I mean that 20 grand, they could … well, $19,970, they could have saved by going with the template. It goes a long way with paying for a monthly subscription for some type of service like Flxpoint to hook up your inventory and to get everything live and the automated orders. Also, you can yeah, use that money on marketing, direct mail or whatever you want to do. But I’ve heard countless stories as well. And I mean, a lot of dealers up to this point had been sort of just getting by with something like a template website that actually looks the same across the board. And it’s a small cost so it’s just been doing well enough for them to up to this point at a small fixed monthly cost.

Eric:

But many dealers I’m looking for are looking for better solutions because now either due to the increased volume they’re getting about the questions on their website or just the features maybe not working as well as they want. They want to do different things, but it’s not customizable. So there’s lots of dealers looking for better solutions out there. And like you said, I would just, if I were a dealer, I would just listen to exactly what you said and not pay some custom … not pay someone 20 grand to just basically get an aesthetically unique website. I mean, that’s not really what’s important if you’re starting out. And like you said about the guns, just because you sell guns in your storefront, doesn’t mean you have to sell them on your website either. You can just omit the guns on your website and sort of do it as like a second phase, if you will.

Eric:

So if you’re unfamiliar with the technology, unfamiliar with running an e-commerce website store, don’t make it overly complicated for yourself and sell guns just because you have your FFL. Go ahead and make accessories only so that way you don’t have to hire someone. You don’t know how many sales are going to get initially. So you’re not going to hire someone for customer service to go call FFLs and get their FFL copy if you don’t have any website traffic. So just set it up for accessories only like you were kind of suggesting and then roll with that for the next two, three months. Hey, if that goes well, and you need to hire someone for customer service anyways, to answer the accessory questions and the accessory orders, well, then maybe at that time you can roll out some guns and try that on your website. But that requires a lot of customization with checkouts and FFL maps and whatnot. So that’s definitely an argument to make that kind of like a phase two or at least waiting until your website has some revenue for your company before you make that investment.

Austin Rose:

Yeah. That would be my advice honestly for all of these retailers, especially again, the brick and mortar going online is just sit down and scope out the phases. And my advice, phase one is just get a website up and going and get the products on there that are super easy to fulfill. Right? There’s suppliers like yourself and other ones out there that are, you go through application form, they drop ship. You literally, you have integrators like us or inventory source and all this to just make it very easy to get on your website and just get that up and going, and you’re good to go, right? And then once you start marketing and making sales and actually moving products online not spending stupid amount of money thinking you’re just going to get sales out of nowhere because your website looks great [inaudible 00:31:09] agency.

Austin Rose:

And then from there, then integrate your POS, right? You get the firearms and figure out what point of sale system you are using. There’s a lot of great ones out there that automate just as much as we try to automate things. And it’s really just doing your due diligence to ask around, to ask other retailers, ask distributors like yourself, you guys know a lot about all these different companies. We see them at SHOT shows. We see them on any type of Google search. If you end up searching firearms, accessories, inventory source is one of the first people that pop up. Flxpoint right there as well. So I would definitely say drop shipping is very lucrative. People kind of stray away from it, but it’s a great starting point, especially for these guys getting online. And I would say my last tidbit is just, it kills me. Don’t blow so much money on some person that says they’re going to make your website look amazing because the website can look the best website ever in the entire entire universe and that doesn’t mean you got people on it.

Eric:

Yeah. My rule with technology is always figure out, see how much time your CTO or your development team says it’s going to take, and then either multiply that by two or one and a half. Because there’s always bugs that pop up along the way nothing ever gets done perfectly on time. Well, not never, but rarely. It always seems like there’s something goes wrong and you’re just going to be giving yourself more headaches by doing like what you’re saying, trying to front load money onto some custom theme, which at the end of the day, you upload your logo, change the color scheme around, update the menu or something on a template and it’ll look like your own custom website anyways. And it’s surprising and actually sort of disappointing that dealers don’t reach out to us more often for recommendations in this field and with e-commerce and the getting set up. Because we just had one of our dealers just go … that does a good amount of business with us, set himself up with something when it might work out just fine with him.

Eric:

But at least during that decision making process, I could have given him my recommendation and maybe that would have worked out better, maybe it would’ve worked at worse. We don’t really know. The future remains to be seen with that. But we did actually have one of our small, I guess I say smaller, but he orders every single day almost. He was mainly just selling on GunBroker only. And he was making manual GunBroker listings just based on stuff that we had large amounts of stock levels on. Right. So he was basically … I mean, it’s he’s selling online, but it’s like, that’s like a super … and that’s a good way to get started, but it’s like very unautomated, very manual. And he has to now take down a listing manually or remember if we happen to be low on stock.

Eric:

So he was doing these packages where he would sell like a trigger and then like two magazines, for example, that go well with the trigger. Well, that works out great until we run out of stock. Well, then he might actually sell a couple by the time … and then come to us to order it and realize, oh, they’re gone now. So that created a couple of situations where he was oversold. So we actually told him, “Hey, what are you doing exactly? What system are you on?” And he goes, “Oh, well, I’m just selling on GunBroker.” I said, “Well, why don’t you look to get integrated with something that will automatically close a listing and when we run out of stock?”

Eric:

So he ended up getting set up with Flxpoint, and I think it’s going to, I mean, 10X his business. Because there were probably 10 packages and 10 packages he was selling on GunBroker of like triggers with mags that we had and maybe 10 packages is all he was doing. 10 SKUs, 10 bundles. And he was still placing an order with us almost every single day, sometimes multiple orders, three, four or five orders a day and they’re all drop ships. But now he’s going to have access to our entire accessory catalog. So I mean, his sales are going to 10X as soon as he gets rolling.

Austin Rose:

Yeah. And it’s exactly like what you were saying. It’s not scalable. It is not scalable. And we had a wonderful conversation, a great conversation with this guy, one of our new customers, not in the firearm niche, but obviously still dealing with the same headaches as this seasoned retailer, right, selling on, pardon me, on website marketplaces. I mean, we see that with a lot of our arm guys. They’ve got their website and they got GunBroker. Just like people that are selling on Amazon and a couple of different websites. And then they’re also, they’ve got five different distributors and their POS system and they need all that to just make sense together. They’ve got full teams, they’ve got their own offices, companies, brick and mortar stores and things like that. And they’re just manually placing drop ship orders with their suppliers.

Austin Rose:

And we’re like, “Wait, what? You’re just, you’re manually emailing these people these orders? Like, you’re not … How are you not automating this?” And it was exactly that exact statement that was, we need to scale. This is not scalable to be doing this all manual. And that’s where obviously again, we come into play and we want to try to automate everything as much as possible for you to scale your business, but it always starts at that foundational level first, identifying what business model you want to take in and ask us too. That’s one of my favorite parts about my job is people ask for my almost business consultant advice. What do you see with your retailers that you guys, or your customers that you guys deal with?

Austin Rose:

And to be honest, we see honestly the right way of doing certain things. I mean yeah, pandemic, you can’t plan a fricking pandemic. But it’s asking us for advice, just like you guys have great advice as well. I mean, that’s why we’ve got a great relationship. So I would definitely say that’s my tidbit there with getting online and everything there, especially for the season retailer versus the new one.

Eric:

Yeah. I think those are really good points. One thing that came to mind too is drop shipping isn’t all roses and daisies or whatever the saying is. I mean, we did have one of our retailers that’s hooked up with us through Flxpoint basically just completely disable one of our competitor distributor products off their website, like the entire catalog, because the distributor was three weeks behind on shipping. So I mean, they decided they made basically a judgment call on their end that, hey, we can’t be selling things that are streamed from this other distributor that was a competitor of ours because our customers just can’t wait for three weeks. So the point I’m trying to make with this is if you are drop shipping, it’s a really poor idea to rely on one supplier because you could run into a situation.

Eric:

Imagine if that was their only distributor and they didn’t have us. Well, then they’re making a decision, do we just sell stuff that’s physically in our warehouse? You know what I’m saying? So thankfully they were streaming our inventory and RSR group’s inventory. So when they turned off our … sorry, I didn’t mean to mention the name, but they mentioned that everyone knows that there were a couple of larger distributors that like them that were two to three weeks behind. So they disabled all their catalog, their entire streamed catalog and then, but they were still able to sell stuff that were streaming on through our inventory, as well as stuff they had in physical stock. And that was just enough sales to keep them more than busy. But can you imagine if they weren’t hooked up with us and they only had their physical inventory and that other distributor. Well, now you’re cutting off like half or two thirds or more of your products.

Austin Rose:

Yeah. Yeah. Well, that’s another good point. And obviously, we can’t take into play what this pandemic is doing. Right. It’s crazy. Who knew that this was going to be a thing and this was really going to affect the world today? But I bring that up a lot too is the shipping times with your distributors, especially deciding on who you want to use. Who do you want to fulfill with? It’s kind of hard to choose that right now. Obviously we still have, we have some suppliers that are getting back into business. We got guys that are still closed. We have people that have touched their way through and have been able to still fulfill dependent usually around the niche and the product which has been just, oh my gosh, so much fun to deal with.

Austin Rose:

Like janitorial supplies is like suppliers have just been like business is booming, but almost in a bad way. Right. And things like that. So take the shipping times obviously for granted during this time. But once everything’s smooth out, I mean, that’s a huge question you should be asking your distributor is shipping times. I tell people, ask them about their customer service. I can’t tell you how many people cancel our services. And they say, “Oh, you guys were great. I just can’t work with X, Y, Z suppliers because they don’t get back to me. They’re like, “They just don’t respond to me.” They’re just like, “They’re a 3PL fulfillment group and they don’t care about customer service.”

Austin Rose:

And I’m like, “That’s number one thing you should be working with.” These guys, you’re building a relationship with these people. You’re not just like, “Oh, I’m just going to purchase your product and I’m never really going to talk to you.” You need to build your relationships with your distributors and make sure that these people know that they’re going to take care of you, because if that’s not intact, that’s your fulfillment and that’s literally your business. Right? And that has to be there.

Eric:

Yeah. If you’ve got a … You’re a retailer and you’ve got a customer that spent tens of thousands of dollars with you and he ordered something that’s fulfilled through a distributor like us. And for whatever reason, we’re backed up. Just due to normal shipping, I mean, it’s probably taking us maybe the three to four business days right now to get orders out the door, just due to the volume. But it’s nice to know as a retailer that, hey, you can email your direct account sales rep, or you can email our dropship team and say, hey, can you rush this order?

Eric:

We try not to do it obviously with every order, obviously, because then everyone’s just getting cut in line. But if we’ve got a dealer that’s consistent drop shipping with us and they’re just like, “Hey, my customer can’t take it anymore. Here’s the order. Here’s the FFL that you need, here’s all the information you need. Please, can you get it out today?” We’ll try to expedite that and meet their needs. So can you imagine being a retailer and having to tell your best customer that spends tens of thousands of dollars with you that, hey, I tried to get your order expedited, but I never heard back. That’s not really a foundation. You’re not going to keep that customer if you’re running that way as a retailer.

Austin Rose:

Yeah. And even just an update. You don’t need to bend over backwards to get this thing out today. It’s like, if you just give me an update on it, I can update my customer and I can say, “Sorry, here’s a promo code.” Right. Or something like that [crosstalk 00:42:18].

Eric:

Yeah, exactly. Some type of reply is obviously better than nothing. Yeah, of course.

Austin Rose:

Better than nothing. I mean, worlds better than nothing. Like if you just go silent, don’t expect that customer to come back. But that’s definitely some great points. We’re running right at our end here today Eric, and honestly it’s been a privilege having you on. It’s been a great conversation. I think you provided some great insight. Obviously 2AW is one of our best distributors and you obviously heard why he explained in great detail about that. But yeah, Eric, thank you so much man for jumping on. I really appreciate it. Obviously I hope everything gets back to normal soon and we can kind of get back to what we’re doing. But yeah, I really do appreciate it. We’ll jump on and we’ll talk more and probably do a couple of podcast episodes in the future.

Eric:

All right. Sounds good Austin. Have a good rest of the day and thanks again for having me.

Austin Rose:

Alright. Thanks Eric. And everybody out there, make sure to tune in for the next couple of episodes that will be coming out here today. Again, thanks for joining The Modern Merchant Podcast.