172. His $15 Million Guide to Ecommerce Success - Retail Arbitrage 101

0:00Imagine growing up with almost nothing, working odd jobs to help your family get by. Now fast forward, and what if that same person built a business from just$3 ,000 and turned it into$15 million in sales? This is Ryan Atkinson, and you're listening to the Up the Podcast, where we uncover the secrets of building and running successful businesses. And our guest today is Chris Kerner, the co-founder of Texas Snacks and CEO of cofounders.com. He has done so much great stuff. He has really hands in everything here, including doing$200 ,000 in his first month of business. Yes, you guys heard that correctly.

0:32He's on the podcast today, talk about his journey from delivering pizza to dominating your retail. So Chris, thank you so much for being here. So, so excited to have you on. I like that. Thanks, Ryan. Yeah, I don't usually talk about delivering pizza in my intro, but it's true. I did it. You came from humble beginnings, and that's actually where I want to start. Let's talk about you growing up because you weren't born in a mansion. You weren't flying on private jets when you were five years old. You had to earn everything. And so let's talk about growing up in a financially struggling household.

0:58And what lessons did you take away from your childhood that helped you prepare for entrepreneurship and all the great things you're doing? Yeah, I was born in Logan, Utah, and I lived in a small house. My dad worked in a greenhouse, probably made$30 ,000 a year. And we're a family of four kids. And, you know, I started these little side hustles and businesses so I could have money for candy and for a yearbook and for bikes, just kind of out of necessity. Yeah. What was that, like, first entrepreneurial adventure you, like, had? I always just, like, loved hearing these stories. Like, that very first one you remember.

1:29It was selling used golf balls. I lived across the street from a golf course and these golf balls would fly into my yard and I put them in a red rider wagon and I got a four by eight piece of plywood and got spray paint and put golf balls three for a dollar, leaned it up against my mailbox. And that's how I made my money as a nine or 10 year old. That is so, so cool. And that has led to a lot of stuff. But important part of your journey is going to Hungary and then coming back. Let's talk about that experience that you had and like what brought you there and then also coming back. Yeah. So when I was 11, I moved from Utah to Central Florida.

2:03My dad got a job at Kennedy Space Center. It's a big culture shock. Went to high school there. Didn't really do any side hustles or businesses. I just had a bunch of odd jobs, waiting tables, busing tables, delivering pizzas, pest control, lawn care, you name it. And then I went on a mission from my church to Central Europe. So I had to learn Hungarian, and I had a mission companion, a white shirt and tie, and we would knock doors all day, every day for two years in post-communist Europe. Gosh, that's interesting. What did that experience teach you? Because going from door to door is, that treats you a lot about resilience and getting no and a door slammed in your face quite a bit.

2:38I added it up and I was rejected about like 23 ,000 times in two years because that's all we did. We knocked doors and we talked to people on the street and asked them to talk about our church. and it did a lot of things. It taught me to like not care about failure and rejection, which helped in business. And it taught me to be appreciative of America. I took it for granted, like I'm sure a lot of other people do. And there's just no opportunity over there in Hungary. Didn't matter how smart or hardworking you were. And so I came back with this newfound contrast of this great country that we live in, which is this desire and drive and motivation that I had never had before.

3:17So speaking of drive, speaking of motivation, that led you to start Texas Snacks. And that's what the base of our conversation is going to be today. So let's talk about Texas Snacks. What is it? What's the premise of it? And like, what led up to it? Four years ago, I owned a 3PL, a third-party logistics business, where we managed all the logistics for e-commerce brands. And at the time, my cousin Kirk and my business partner was visiting from Utah. And we went to a Buc-ee's his first time. We were just talking like, wow, like imagine if Buc-ee's sold online because they didn't sell online. And I was like, Kirk, they could be our client.

3:53They could be our vendor. We could manage all of their e-commerce forums. We got all excited about it. Cold emailed them, no response. Try it again, no response. So then I was like, Kirk, what if we just did something crazy? We bought one of everything and we took pictures of it all and we launched a website and then just like launched it. We just started selling their products for them. So we did. So let's talk about, oh, you bought one product of like everything. How much did that cost? And like, what's the markup there for it? Yeah, so that first batch was like$3 ,000 or so. I brought my wife and four kids.

4:28We loaded up all these carts, took a bunch of pictures and we marked it up not nearly enough in the beginning, like 40%. And the fulfillment and shipping costs were pretty high. But today we mark it up closer to 80%, hoping to make like a 15 % profit margin. Interesting. So obviously I think there's like a lot to go on with this. I want to ask first like demand for these like Buc-ee's products. And guys, we're both in Texas here. Chris and I are. And if you've never been to Buc-ee's, Buc-ee's is like a whole experience of itself. So I want to talk about like where does the demand come from? Is it nationwide or like who wants Buc-ee's products?

5:01Yeah. So it's like it's a really unique company. They only have about 50 locations. But by my best guess, they're privately traded. So no one really knows. But I believe they do about a billion dollars in sales a year. from 50 gas stations, which is crazy, but they don't sell online. And they sell snacks, but they sell a lot of merch, a lot of shirts. And the reason is good because they can't really sell their products for more than what they sell in store, hoping to make a profit. Because it's inefficient to ship, you know, one bag of chips across the country, so they need to market up a bunch.

5:34But they take customer service very seriously and they don't want to ruin the goodwill that they've built up with their customers. Yeah, it is such an experience going to Bucky's because you have like 100 gas pumps along. Like that's a whole like retail store and everything as well. So you're launching this online. It's an e-commerce like Bucky's store, essentially. Let's talk about like that first month. Like, did you guys get demand right away? Or like what led up to successful launch of this? So we launched by cold emailing reporters. We wanted it to go viral. We thought it'd be a good story.

6:05That was kind of our thesis was either this will turn into a partnership or a business or just a good story. So we started emailing reporters. They loved it. They reached out to Buc-ee's for comment. They put us in touch with them and they wanted to be sure that we didn't infringe on their trademarks, that everyone on our website was clear that we did not represent Buc-ee's, that we were an unaffiliated independent third party. So we made a few changes on our website and then a bunch of articles were written about us and we went viral and it was timed just right. This was 2020, November, right before Christmas, big fourth quarter rush.

6:41and we did about 200 ,000 of sales in those first 30 days. Let me emphasize that$200 ,000 in like the first 30 days is insane, but you only bought one product of like each. So are you like scrambling to go to Bucky's like restock here? Like what's that backstory there? So we bought one of each just to take pictures of them all. But then once we launched and we sold them, then it's like, okay, now we need to spend a lot more money. So we just started going to Bucky's like every day and spending thousands and thousands of dollars. and they have hundreds of different products. And then, you know, every t-shirt, they have six different sizes and they have 50 different types of t-shirts.

7:18So that's 300 different SKUs just for t-shirts. And then they have pajamas and hats and everything. So it was very complex and it took us about two years to really get our arms around the logistics of this business. Yeah, the logistics I think are fascinating. Let's talk about like those first month logistics. Guys, stay tuned because we're gonna dive into like starting your own basically retail, like arbitrage, like type system here. What were those logistics like? Was it just you and your family doing it? Do you have a partner doing it? Because you're doing a lot of stuff here. You're putting it on your website.

7:48You're grabbing the supplies. I'd love to hear those logistics just to get people thinking here. Yeah. So thankfully, we already owned a logistics business. So we had a small warehouse with shelving and employees. So we could just plug that into the system. But even so, it was still complex. And we didn't do a good job taking care of our customers in the beginning because it was so messy and complex. And, you know, we had this business that we owned right here, fulfilling products. But then we have this other business where we're fulfilling products on behalf of other customers. So we were always kind of battling these two product lines and it made it pretty difficult.

8:23But I mean, we could have launched out of my garage. We could have launched from home. It just would have been even messier. Yeah. I have a question for our listeners. Are you wanting to get featured on top podcasts like Upflip without spending hours on outreach? If you answered yes, then the answer for you is Podpitch. Podpitch has the largest podcast database in history. It's updated daily with every data point you could imagine. All you have to do is describe the kind of podcasts you want and boom, Podpitch instantly built a massive list ranked by relevance. Then just craft your pitch or let Podpitch do it for you.

8:57It even syncs with your email to match your writing style. And when you're ready, send up to 10 ,000 fully personalized pitches, each one tailored to that podcast host's latest episodes, tweets, and interests. Stop wasting time on cold outreach. Get booked on the right shows with Podpitch. Try today by clicking the link in the description below. That's what I think like the beautiful thing about like this business idea is, is like you can launch this in theory, like from your garage, from your house. So I want to talk about like, how did you then take Texas Snacks from that first month of success?

9:26You guys did$200 ,000 and I believe you guys generated up to about$15 million in sales over four years. What were some of like those important aspects to scale to that level? Oh, well, one of our challenges is figuring out how to hire and motivate low wage employees. people paid$12 to$17 an hour, we're competing with Amazon. And that's tough to do. We don't have the benefits that Amazon offers. So you kind of have to go hard the other direction and say, we're not Amazon. And no, you don't have those benefits, but we care about you as a human and you can listen to music while you work. You can't do that at Amazon.

10:02We're going to have pizza Fridays. We're going to play fun games. We're going to have a culture. You're not just going to be a number and you're not going to get paid as much as Amazon, but you're going to have a better work-life balance. So that's kind of the approach we took. Yeah, I love that. Let's talk about more approaches. So someone that's like, okay, I'm dialed into this right now. Chris has got me on the hook. I can do$200 ,000 in sales my first month if I do this right. If you had to go back now and tell someone how to identify products or markets with high resale potential, what does that process look like for someone listening?

10:35Yeah, so I would start by going to the discount suppliers like TJ Maxx. There's an Ollie's discount outlet and you can download apps where you can scan certain items. Like let's say you see an air fryer. Like, oh,$30 air fryer. It's on clearance. Let's see what this goes for on Amazon. Hmm,$80. Interesting. And then you can just learn how to play the arbitrage game and you can list them on Amazon, send them all to Amazon at once in one box and send it with the proper labeling and sell them through your account and make a margin on the difference. To me, that's a much more approachable way to sell things online or on Facebook Marketplace because it's more scalable and not dependent on, you know, one big white whale partnership or customer.

11:18You can basically buy and sell whatever you want. Yeah, so in simplest terms of how I'm like comprehending this is you're basically finding something at a discount and then just reselling it for a high markup. Yeah, or I like just as a game going to Facebook Marketplace and tracking like what is getting a lot of clicks. I'll list dozens of different things for sale just from images that I get from Google Images to see what type of clicks they get and I'll test different price points in different markets. That's just like a test, like a fun experiment to see where the demand is online. And it's shocking how much you can learn from doing that.

11:55Yeah, I wanna make it as easy for listeners that wanna do this here. What has been a product that has had high demand that you've seen over the four or whatever, four years, five years that you've been doing this? probably seasonal shirts because of the fact that they're different every year, new design every year or tumblers as well. These are mass markets. It's things that people need to use and or wear every single day. And every couple months they're coming out like St. Patrick's day, Valentine's day, new year's Eve, new designs. And then every year, new designs of the same season as well.

12:29So that's worked well. Yeah. I'm curious, like, where are you getting these seasonal design, like t-shirts? Is it at like the TJ Maxx's or like, where is that at? These are Bucky shirts that I'm referring to here. Yeah, I think it's just important to like give context there. I'm like where these are actually coming from and everything like that. But what are like the startup costs with this? I know you spent$3 ,000. Is that really all you need to get started? Could you get started with less and build from there? Would love to hear Chris's advice. Yeah, it just depends on the industry and on the types of products that you're selling.

12:58Ours costs$3 ,000 because that's how much it costs to buy one of everything for Bucky's, but that's very unique. I would think in most cases, it costs much, much less than that, especially if you have a credit card with a revolving 30-day balance that you could pay off by the end of the 30 days. I would think as little as$200 or$300, especially if you're leaning heavily on Facebook Marketplace. Is that the best place for people to get started is Facebook Marketplace for reselling? I know you brought up Amazon as well. Are those like the two heavy hitters for reselling then? Absolutely, Facebook Marketplace because it's so approachable.

13:28You can ship things on it, but it's more built for local transactions. Amazon is much less approachable because there's a lot of approvals, red tape. You have to label things very specifically. But you can use Facebook Marketplace for the testing. And then once you find winning products, you can scale those up to Amazon. Interesting. Question off of that then is like, how do you identify like those winning products? Like I'm sure like revenue and all that stuff, how quickly they're like their shelf life, if you can call them that, or what are the metrics that you look forward to find that winning product?

13:58Yeah. So I like to borrow ideas from other marketplaces. So one thing that I'll do is I'll open an incognito tab in a new browser and I'll go to Etsy.com and I will just kind of see what the homepage is showing me. There's a lot you can learn from algorithms. The algorithm is going to push to you what is already hot. Just like when you create a new TikTok account, TikTok knows nothing about you. It's going to show you videos that have hundreds of millions of views because it doesn't know who you are yet. And then if you start swiping on Theo Vaughn, comedians or whatever, prank videos, it's going to start showing you more of that.

14:33And so go to eBay, go to Facebook with brand new accounts, clear your cookies, clear your cash, and just start looking. What's it showing me? And then you can take listings like those and list them yourself. And then you can try, all right, Houston and Dallas are comparable in size and demographic. I'm going to post, this is something, pizza oven. I just bought a pizza oven. I'm going to post a used pizza oven here, used pizza oven here. Oh, okay. This one got 30 clicks, but five inbound messages. This one got 30 clicks, but 15 inbound messages. Interesting. So there's three times higher intent in this market versus this market.

15:09So you can run dozens of tests at any given time and the algorithm and the people will just give you all this data that you can say, okay, pizza oven's cool. I'm going to start now that I have the demand because that's the harder part. Now I'm going to go find the supply and find a way to source these because I know that I'll be able to sell them at a profitable price point. Interesting. And I know we talked about sourcing this. I mean, where do you source like a pizza? Let's stick with this example here. Like, where do you source that pizza oven from? Are you looking on Facebook Marketplace at the complete source where you're just going to resell it?

15:41Or like, where do you find that source for all of this? Yeah. So one thing that I'll do is I will buy and sell from Facebook Marketplace. So I'll go to Facebook Marketplace and I'll run a search that's over 30 days old. And let's just keep using pizza ovens as an example. And then I'll know exactly, you know, after 20 minutes, I kind of know what the market price is. I'll run search for items that have been on Facebook Marketplace for a while. And I'll look for listings that have poor description, poor pictures, one or two pictures. And then I'll just know immediately that there's an arbitrage there.

16:16So if it's been listed for a while, that means they're more likely to take a lowball offer. If it's been listed for a while, it means it's probably because they have crappy pictures or description. So pizza oven isn't a great example for this because you really need a higher ticket to make it worthwhile. But all else equal, you could just buy something at a steep discount, take possession of it, take professional pictures of it, upload as many pictures or videos as it will allow you to do, put a keyword rich description in there and you can sell the same item on the same marketplace for more money because you have more visibility.

16:47Yeah. What I love about this strategy is one that was like super tactical. But what I also love about this as well is anyone can really do this. This is like a 15-year-old could do this. A 60-year-old could do it. Everyone in between. It doesn't sound like the strategy is just narrowed to that 30-year-old entrepreneur that has five businesses. You could really get started as your first business on this, which I think is super exciting as well. I want to talk about continuing down that road of, okay, let's just continue with these ovens just to keep it easy for people. You achieve some early success.

17:13You have some good numbers here. What steps should they take to then grow and like sustain that business? Is it more product offerings? Is it automations? What would you advise someone? I would advise them to start looking at like liquidation auctions. Two websites that I like. One is called B-Stock, where you can buy Costco returns. A lot of people are turned off by it because you have to have a reseller certificate, but you're looking like$100 and filling out one form. It's not that difficult to get. But so bstock.com slash Costco, I've seen people buy a 20 foot container full of treadmills for a thousand dollars.

17:50You know, like it is stupid because it's either they sell this for next to nothing or they throw it away. So that's a great source. And what's great about that is you can go list those treadmills on Facebook marketplace before you spend a dime, before you buy anything and say, okay, wow, these sell really well. I'm going to buy these. In fact, I can afford to pay a lot more than the current list price. Or, you know what, even if I break even on these, they're not selling, so I'm not buying these. So most people just don't realize how much research you can actually do before having to spend a dime.

18:23It's just like so amazing because what excites me about this, I want to double down, is anyone could do this, but like it also sounds like you could do this as like a side hustle in a sense, like you can have that nine to five job. And I know a lot of up flippers love like side gigs and it sounds like something this is something you can do as a side gig. Yeah, and it's just like you have to rewire your brain if you haven't already. And when you make your first dollar on the internet, like something changes in your brain. And it's like, oh, that was cool. This is possible. And then it just opens up a whole world.

18:50A lot of people, they try to start at step four, right? Step one is like generate a dollar. It's not get an LLC. It's not go ask your friends and family for feedback on your idea. You need to find a customer, even if the customer is your mom, right? Yeah. You need to find a paying customer to validate the concept. And then you start, you know, doing the other things that are a little more sexy. Because we start with the easy, sexy things. How about a domain name? I'm serious. No, you need to get a customer. Because that's the hard part. What's so funny about that, I was literally just talking to someone on this podcast about that.

19:22Like, I feel like a lot of like wannabe entrepreneurs, their workflow is like, get a domain, register an LLC, make a website. But people that have been in the weeds have started companies that's get a customer, improve the customer, then maybe make the website like step like seven or eight. Oh, yeah. I've started businesses that had six figures of revenue before it even had a website. It was just an afterthought. Insane. Yeah, so everyone take a note on that as well. Of course, what comes with your negotiating with people that are buying, your negotiating with people that are selling, we'd love to hear like what's your approach to negotiating better deals with suppliers or wholesalers to increase those profit margins as well?

19:58Like do you have any, besides like the Chris Foss book, but like any negotiation tips there? I look at it this way. Like if you were going to buy a truck from your dad, is he going to cut you a good deal? Yeah. Like he still needs to make some money from it, but you're going to get about the best deal possible for that truck. And why? Well, it's because you have a relationship. So that's like one end of the spectrum. The other end of the spectrum is a stranger from Facebook marketplace that's selling a truck. You show up, you meet him, you give him an offer. He doesn't know about you. He doesn't care about you.

20:29Right? So you're going to get a deal on the other end of the spectrum. So with buying from wholesalers or buying real estate, anything, you just want to move closer to that end of the spectrum. And you can only do that by playing the long game, building relationship with them, not like beating them up over price on day one. In fact, giving them maybe more than they're expecting on day one to buy some goodwill because that will pay off 10 times more in the future when you actually really need it. Like to save$5 on a pizza oven today is really nothing. But when you're buying hundreds of them, and you could save$10 or$20 on each of them, that would really move the needle for you.

21:05But people, they have short-term thinking a lot of times and they just try to play hardball on day one and you really can't do that. Is there anything that you do with like suppliers or anything? I know we just had like the holidays here. Like, do you send suppliers like Christmas gifts or anything or like customers? I would love to hear that because I think that's a unlock for a lot of entrepreneurs when they don't think about developing these long-term relationships. Yeah, and especially, I mean, in the wholesale game or liquidation game, a lot of these vendors are, you know, there's six or seven figure relationships.

21:33And let's say you have a vendor that really likes you and he sells pizza ovens and he's got 50 people in his Rolodex that he can call that he's gonna call you because you sent a$50 gift basket for Christmas. But the fact that you're getting the call first could be worth$100 ,000. But you sent him a$50 gift basket and that's why you stood out. The trick is to offer things that have much more value than they have cost, right? Like back to my warehouse example, when we were hiring warehouse associates, we would pay for their Netflix and Hulu and YouTube premium subscriptions, which was like$50 a month.