E-commerce Category Challenges

Shaan Puri shares his experience running an e-commerce business, noting that even when succeeding in the space, the fundamental challenges make it a difficult category to operate in. This perspective comes from someone who has built a successful e-commerce operation but still sees inherent challenges in the business model.

Key Points:

• E-commerce Business Fundamentals:

  • Despite achieving 8-figure revenue, reached breakeven with no profit some years
  • Has not taken any money out of the business in 4 years
  • Cash gets tied up in inventory, creating operational challenges

• Shifting Business Focus:

  • Initially focused purely on growth, doubling revenue yearly
  • Later shifted to EBITDA optimization
  • Currently working on optimizing cash flow
  • These three aspects form a "3-legged stool" needed for a successful business

• Steps for EBITDA Optimization:

  • Research industry standards for EBITDA margins (10-25% range)
  • Create detailed EBITDA budget breaking down revenue allocation
  • Communicate plan relentlessly to team leaders
  • Align incentives with EBITDA targets
  • Conduct regular "spring cleaning" cost reviews

• Current E-commerce Winners:

  • Companies leveraging TikTok flywheel are seeing success
  • Using creator economy and affiliates effectively
  • Creating content that drives organic discovery

• Key Lesson:

  • Playing in a hard mode category (e-commerce) has one advantage
  • When you move to easier businesses later, you're equipped to dominate
  • Skills learned from managing tight margins transfer well to other industries

• Warning:

  • Even when winning in e-commerce, it's still a challenging category
  • Success doesn't necessarily make it a good business model to pursue