One of the goals of ecig.com is to be as transparent as possible with all of our employees, and customers. We’re not a company that is going to hide issues and tell lies as other companies do. I’ve been keeping our employees updated (almost) weekly on how the company is doing, issues that have came up and what our goals are for 2015. Keeping with our transparency I wanted to write a blog post on our launch, and where we are now. This should be a good read if you’re interested in our company, or just a hungry entrepreneur looking to open your own ecommmerce or electronic cigarette store. Warning, this is a long read.
When I began this journey to create a ‘one-stop-shop’ for electronic cigarettes, it seemed like such an easy task! First, buy a domain that people will never forget. Then purchase inventory, hire some employees and get rolling! Well it turns out that it was much more complicated than it seems. My first clue that this journey would be a little choppy was right before we started developing ecig.com. I signed up for PayPal, because who doesn’t want the option to pay with PayPal?
PayPal / Merchant Account
Almost immediately after signing up I received an email from them letting me know, hey… uhm you can’t use PayPal on an ecig site. I went back and forth with them about this, and did a little more research on the subject. It turns out that ecigs are considered ‘high risk’. What this means is first off, say good bye to PayPal and second most established merchant providers such as First Data, Bank of America, CitiBank etc. will not let you use their services to process credit cards. You have to get a high risk account at a higher rate to sell ecigs online. When you’re trying to offer the lowest price on the internet, which we are, every penny counts, so this hurt.
I did some research and finally settled on a processor, I’m going to leave their name out of this blog post as they still owe us money! I was able to get a decent rate and for being ‘high risk’ after going back and forth with a few different companies and comparing fees/percentages they were going to take from us on every transaction.
I’m going to fast forward a bit here to our launch. We launched on a Saturday, on Monday I came in and checked the bank accounts, there was no money from our merchant account deposited. I thought well, it’s just Monday sometimes it takes a while and went off to help our shipping department (we’ll get to that later). Tuesday I came in, still no money. We did a large # of orders on our first couple of days, so this was a pretty substantial dollar amount. I called up our processor to ask if there was any issues. The processor told me that she would check with the under writers and call me back, she did and there was no issue the money should be deposited on Wednesday. Wednesday, it was not. At this point, I’m beginning to worry a bit as we were running out of inventory due to the sale, and needed to start ordering more. After another call, I was told that the under writers wanted to know “Why we did so much business”. Which I thought was pretty comical, but I explained that we ran a opening special that was really really good, and just sold a lot of products. The merchant told me, ok they’re going to go ahead and release the money it will be in on Thursday.
At this point I believe you can see where this is going! Thursday, no money. Called the merchant and she informed me that since ecigs were high risk the underwriters have determined they wanted to keep $30,000 of the sales to make sure there was no charge backs for 3 months and they would release the rest of the funds. As I stated before, we needed inventory so I agreed just so they would deposit the rest so that we could restock. Friday morning again no money in the accounts and I was pretty furious because I had been lied to all week and this was our money, how could they do this? I called and left a message for a supervisor to call back, I had a lot of other things going on during this launched that I was worried about at this point and had no idea there would be a problem. After all, the merchant account receives money every transaction, so what was the issue?? I received a call back from the risk manager who informed me “Actually, the under writers did not want to do the reserve they decided that they are going to keep all of the $ that you have sent us for 180 days and also your account is being terminated”.
I could not believe what I was hearing, it made no sense? The risk manager explained to me that there were a large number of charge backs on ecigs and that an ecig is a very “easily resalable item” so fraud is very prominent. I informed her that iPads are a very “easily resalable item” as well, which didn’t help. Then I explained to her that we were a startup and if they kept our money for 180 days we would be out of business. At this point, who knows how I was coming across because I literally was at the mercy of the merchant account. If they didn’t want to release our money, I guess they didn’t have to. The risk manager spoke with some others there and explained to them our issue, she was able to release x amount of money now and then in a month they would start releasing x amount on a rolling basis each month.
As of today 1/09/2014 we still have not received all of our money. We’re owed around $15,000 still from this processor, but we survived and she let us keep our account for another week so we could find another processor. This time, I made sure that there would be no issue with the volume. So far I’m happy with it, but its still high risk and at a much higher rate than normal ecommerce sites pay. I’ve came to the conclusion that it will be an ongoing issue finding the right processor with the lowest fees so that we can still offer best prices, and not take a loss by doing so.
On November 1st 2014 ecig.com launched at 6am central with a “we’re going to loose 100,000 promo”. What that meant was that we were offering 52% off every product, until we lost $100,000 as that put every product under our cost. The only people that knew we were launching, were those who had signed up for our mailing list. The first hour, we received 60 orders. Second hour we had about 120. Then on the third hour I decided, let’s pick it up a bit. I went to reddit’s electronic cigarette sub reddit and posted our deal. That in itself was a game changer.
By 5pm on November 1st we had over 1600 orders. We hit a lot of major deal websites such as vapingcheap.com and slickdeals.net, as well as pretty much every internet forum there was related to ecigs. We finished out our launch sale with over 2200 orders, and a loss of $100,000 which in my mind meant, we had just gained 2200 customers and was very true.
The Great Shipping Debacle
I call this a debacle because to me, it was a huge screw up. Others around the industry may not believe so, because we were able to get all orders that we received out that week and apparently other ecig stores online take even longer during big sales? Either way, it was not what I wanted ecig.com to be known for.
Before our launch I submitted an ad on craigslist for a Shipping/Warehouse director. I interviewed around 20 people for this position. Some wanting $10 an hour, some wanting more than $100,000 a year to do this job. My thoughts going into this were I could probably setup our warehouse and do the shipping myself but I’d probably spend more money on things that we don’t need then it would cost to higher someone that had done it, and do it right. Plus, I really didn’t want the extra headache there were so many other moving parts for one person that I needed to take care of. Those exact words were relayed to each applicant.
After the interview I narrowed the field down to 2 possible candidates, the one that won out had the following qualifications:
- 20 Years Experience working as a warehouse director.
- Managed a warehouse of a large ecommerce store.
- Experience with magento (our shopping cart software)
- Built warehouses for Dell and moved them to different locations.
After meeting with this guy, I was sold. I mean he’d done everything we’re trying to do and had used magento which means he’s probably pretty technical and can work hand in hand with our web team. Awesome, you’re hired dude!
The first job of our Shipping/Warehouse director was to setup and secure our warehouse. To keep costs low, my buddy owns a building in Austin that is currently not being used. He was kind enough to allow me to use it to setup a temporary warehouse. The only thing was, if the building suddenly sold or was leased we would need to be able to leave quickly. So no permanent equipment needed to be installed. Everything else was completely in his control. Sure, no problem. He setup the warehouse, installed security cameras secured the warehouse. We were ready to start ordering inventory!
Two weeks before Nov 1st I sent several hundred thousands of dollars to China for inventory. This was pretty nerve racking in itself. Before launch I needed to hire 6 employees to run customer service, get them trained up and ready to go on top of everything else. I thought everything would be fine, because I had a top notch shipping director that was assuring me “we got this”. By “we” he meant himself, because he did not hire anyone. Training went great, we got some really good people on board and now we were ready to launch.
Since our launch day was on a Saturday, our shipping director informed me that no carriers really ship on the weekends unless you’re a big shot like Amazon. I said well, if you think there’s no reason for you to be here then I guess you don’t have to be. He came in that morning anyways, which in hindsight didn’t help a bit, but I was glad. Once I started rattling off how many orders we had completed he came over and said “I think I’m going to go over to the warehouse so we do not get behind”. That turned out to be an huge understatement.
Around 1pm I made a post on Facebook asking my friends to come help. I had not been over to the warehouse but I knew he was going to need some help because of the volume. Family and friends started to show up and I sent them over to the warehouse. The entire day I never once stepped foot into the warehouse. During this time, I was the one replying to all of the employee questions and responding online to inquiries that our agents could not answer. I was literally at the computer for over 12 hours but I LOVED IT! I have a passion for customer service! Our sale was going off without a hitch, my shipping manager said there’s no issue and I’m just gonna sit back and start refreshing our bank account. Boy was I wrong.
Around 4pm a friend of mine called me and said ‘hey man, we’re headed home the shipping dude is closing up shop”. Even still at this time, I didn’t think much of it as this guy was very confident in what he was doing. I thought that they’d knocked out a big chunk of the orders so time to celebrate! After things died down around 9-10pm that night, I went over to the warehouse to check it out. Do you know how many packages were boxed up then? Zero. Absolutely no packages had been shipped. There were boxes laying around with product in them, but none of them were ready to go. I realized that we had a major issue on our hand. I had been promising 3-5 day delivery online and we had 2000+ orders that needed to get shipped out.
On Sunday November 2nd, my wife and I arrived at the warehouse @8am. We were ready to get goin and get some orders OUT THE DOOR. We had no idea what procedure our shipping director had been using. There were boxes laying open with product in them and a packing slip, there was product laying out on a table with no packing slip, some with packing slips and boxes that were half full of products from a packing slip. We waited till he got there, he arrived at 12pm. So not only leaving on launch day early, but he came in the next day at 12pm. Still at this point I really believed he knew what was going on. Well he didn’t.
When he arrived I started asking him what to do, what procedure we are following. There was absolutely no procedure. There was a lot of products on the shelf, but hardly any of them were even labeled! I realized, I have to take over and come up with a procedure to quickly get of the orders out. After coming up with a plan of action, we were finally able to get our first package marked as shipped at 3pm on Sunday, over 30 hours after we launched.
The next week I spent anywhere between 10 and 18 hours in our warehouse with my family and friends…and the shipping director boxing up orders. This whole situation had a ton of mess ups, but to just give you one of them so you have an idea, we only had 100 labels for our thermal printer. That next Saturday, all of the orders were out the door and that Monday he was let go.
During the launch, I expected issues but the shipping department was never a huge red flag. I should have been over that department more, and probably just did it myself. It’s my fault 100% that this happened and I own that, I wish it hadn’t but it was a huge learning experience for me. Our warehouse is now setup properly with SKUs and products actually labeled. When we ran our Black Friday and Cyber Monday sale, it went off without any issue on the shipping side.
We had some amazing feedback during our launch and while there were issues with shipping, the new customers we welcomed to the ecig.com family were very understanding. A special thank to my good friends and wife who came out to help package orders and stay up late with me during this process.
The dust has settled and we’ve had time to put a lot of policy and procedures in place. We currently have staffing on almost 24 hours a day to answer phones and chats or tickets that you might send in. Our prices are the lowest that I can find on the internet and we still offer free shipping on all items.
That pretty much sums up the story of the ecig.com launch! We plan to be around for many years to deliver the best customer service and the lowest prices around… With fast shipping ;).
If you ever have any questions or need any help personally, I am available by email. Josh (a t ) ecig.com. I’ll be more than glad to assist.