SNM258: Building A Software Business Around E-Commerce with Irina Poddubnaia

Jonathan Green: Building a software business around ecommerce with special guests Irina Padubnaya on today's episode.

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Jonathan Green: Thank you so much for spending some time with us. I mean, I'm really interested in your journey because a lot of people think about doing ecommerce or doing software or being an online entrepreneur. It's very rare that people go down the path of all three. Where did your journey begin and your passion for taking your own path start?

Irina Poddubnaia: Well, basically it began when I was still an office worker. The nine to five are typical. Then I just literally I got tired of working as a cogwheel in a machine. That's what it was for me. And I just decided that I'm going to start something of my own. And at that point, I met a wonderful person. We got married, and then we moved to China. For some reason, we moved to China because we thought it was a very good idea. That's where we started fulfillment business for ecommerce retailers all over the world. So we were shipping the goods from China to those retailers. And at some point, that business just got so overwhelming and complex, and it was kind of draining. But we decided that we're going to switch over to the business that doesn't require for us to be on premises or package some boxes or ship. And so we decided to move online. And it wasn't fully our decision. The circumstances just went that business wasn't making money anymore. So we just had to switch gears. During that time, it was overwhelming to run the companies of just the two of us, and we had to automate a lot of those routine operations that ecommerce businesses do every day. So that's why we developed this system. That system, at that point, it just didn't have a name, and we wanted to bring it to a wider market. So we started calling it Trackmagic. But when we realized that Trackmagic.com was taken, so we had to change the name a little bit, and it became Trackmage, which is close enough, but not a lot of people pronounce it correctly, which we didn't know at the time. When we were naming the business as well.

Jonathan Green: So let's go back piece by piece through your story, because I think it's important to really understand the journey. That's what's really exciting for my audience. And I want to know, when you were thinking about leaving that office position, was it something that you slowly built up to and you started working on something on the side? Or one day you just said, I'm out of here. I can't do this anymore. And you kind of had a breaking point.

Irina Poddubnaia: I believe it was this realization that what I'm doing, I could be doing more. It was really just that feeling inside of me that kept nagging me that like, okay, every day I'm doing those same assignments and I'm getting mediocre results, or I'm not getting results, and the boss is just saying that I need to do this and that and that. And I couldn't really feel that this is something that I was meant to do for this entire time and my life on Earth. And at that point, the digital commerce and just online influencers, they were not that mainstream. And I just didn't know where I belonged or where I wanted to go. I just thought that I couldn't do the same thing all over again. And at that point, I was just looking for some venue out, because during the nine to five, I was still involved in international commerce. So we were selling the frozen berries and then later some greases for automotive industry. But it wasn't something that I was really excited about.

Jonathan Green: And what was the response of your friends and family and coworkers when you said, you know what? I'm out of here. I'm going to China. I want to start something new from scratch?

Irina Poddubnaia: Everyone was very much frightened by that because, again, it wasn't something that people do. At first. They thought that it's going to be just a honeymoon or something, that we will go to China and maybe return in two weeks. But when we didn't, in two and a half years, it was just a whole different understanding. Like, I lost all the connections to the local friends and other people that I used to maintain those connections, but I made a lot of acquaintances online, and that's how I started working online before it became mainstream during college. And it was good seven years before college, to be honest.

Jonathan Green: So not everyone understands exactly how ecommerce works. And one of the big challenges for a lot of people in ecommerce is getting the right product from the right factory from China to their customer in America or Europe. And it sounds like that's where you fill in, because I know that a lot of people either they have to go to China themselves and tour a bunch of factories, and hopefully one of them they find is the right fit. And I also know people who they've partnered with their factory in China and then that same factory started making knockoffs that they were selling to compete with their own customers. So it sounds like you were helping people to bridge that gap between culture and communication so they could get the product they wanted, the price they wanted, without getting some of the disappointments that have happened to other people. So can you tell me a little bit about exactly what you guys were doing and how that process worked?

Irina Poddubnaia: Well, it was very much what you would expect. So one of our customers, like even the prospect when he heard about the prospect of ordering something from China, they just got their whole office and they came to Guanzhou. There they went through a lot of plazas, like plaza in China. It's this huge skyscraper filled of goods. Literally, it's just like a marketplace, but, like, in a form of skyscraper. And the only thing that they got out of that was that it's very hard to work with Chinese suppliers directly. And another thing that they got was they actually fell ill because of all the rain during that period, and they had to contact us again. And it was a very interesting roundabout way where I suggested working together. Initially, when they came to gonzhou, they went around, like, for two weeks. They talked to a lot of Chinese suppliers, then they went back to their home country and they had to contact us again because we couldn't work with those suppliers that they got the contact for. So what we did, we actually helped people not only source the products, we also checked the quality and checked the quantity of the batches. And we made sure that in case something wasn't on par with the expectations of a customer, we could exchange it or refund it. So we were this intermediary and the supplier who actually makes sure that everything goes according to plan and everything else. We were the only island of trust in the entire equation because everything in the logistics department could go haywire. Everything in terms of the product itself, the branding, et cetera. So we had a lot of challenges to overcome, and the customers didn't even know about a lot of those challenges. We didn't tell them about some of the things that we did for them, but it was a very challenging business to be in in the first place.

Jonathan Green: So let's talk about some of the things you encountered. Maybe you can tell me how often there was an issue with an order, whether there was a mistake or a problem with quality control or there wasn't the right number of units. How often do things like that happen? And what were some of the biggest and or craziest experiences you had with big surprises of it being the wrong product or something wrong in the shipments?

Irina Poddubnaia: Well, the thing was that every order had some problem or another because, again, sometimes it was just something minor, like the supplier just didn't provide some detail. They forgot to ship it, but sometimes it was like an utterly depressing experience for us. For example, once we ordered a batch of clothes, the entire line where this means all the sizes. So from S to Excel, and we packaged everything. We counted it, we shipped it to the customer, and when the customer received the good, they said that the entire color was missing. Since at that point we were processing all the orders manually and we were only consulting Excel spreadsheets, that's when we realized, like, we screwed up majorly because the supplier just didn't provide the entire color, and that's why we missed it. And that's when we realized that we needed to have the inventory acceptance system, and we needed to have more automation in place so that this mistake is never going to happen again. So this was one of those experiences where we realized that even if we pay attention, even if we do everything correctly, from our standpoint, there needs to be a point of reference and there needs to be some standardization in place that is going to make sure that everything goes. swimmingly even if we as people, we make mistakes. So people do make mistakes systems. Not so often. So that's when they started developing the inventory tracking. Then we added the shipment tracking for the customers and additional functionality to even communicate with suppliers.

Jonathan Green: Yeah, a lot of people think that with an ecommerce and ordering from China, the hardest part is the finding and ordering the product until it arrives or gets shipped to the wrong warehouse or it's the wrong size. I've certainly ordered things from China. I live in Asia, and it's never the size of the picture. I always love when I see ads for treadmills, and then the woman running on the treadmill is so tiny. I'm like, there's no way they're sending a nine foot long treadmill. Like, they're so used to resizing every product that it's completely ridiculous. Like on toys, I ordered one of those little stacking toys for my daughter. I thought it would be as big as a picture, and then it was smaller than my hand, and I was like, you got to check the measurements every single time. But when they do it with treadmills or cars, you can really tell because there's no car that's so much bigger than a person. So it's often the unexpected. And I'm also very interested in this part of human error, because a lot of smaller entrepreneurs, no matter their industry, keep everything in their heads. And this is a mistake I've made many times when I was starting out, is that I just knew the process in my head. And because until I created a checklist, there would always be a mistake or something would slip through the cracks and wouldn't go through the testing process. And then when people try to expand, like when you were running the operation, the two of you and you wanted to add an extra person without a checklist or a really strict system or a software check, right, to make sure they were doing what they said, that's when things would really start to fall apart, right? That's when you run into the issue. You can't scale because the process isn't refined.

Irina Poddubnaia: Well, the thing is the process needs to first be tested because whenever there is like the unfortunate truth about the founder or any entrepreneur is that we are the Swiss Army knives, we solve all the problems, we know everything we do invent solutions that need it. And when you hire your first person and if you don't have an unlimited budget to hire a real superstar in that position, you will probably encounter that people don't like to think or they simply don't. They don't invent any solutions on the go. So that's why you need processes and that's when you need to be very strict with standards that you set in place. Because the best part that you can expect from the person is that they are going to do their job exactly as described and if they do that, they are already a very good employee. You don't have to expect anything else from them. The other part would be you get what you tolerate. The person is always going to test the boundaries like what they can stop doing or what they can avoid doing, what are the expectations on paper versus what they are in real life. And that's when you have to always evaluate if what you are getting or what you used to get before is the same as you are getting it now. And that's why the performance review is also important in the process. So there you don't only evaluate the process but also evaluate the performance of people that you hire. And just like as a third part that might be interesting and might be important, it's communication. So whenever you are hiring a person, you need to be able to communicate with them seamlessly. And when we were in China, we had this enormous language barrier to work with and most of the people whom we worked with mainly spoke English. But again, it's much easier if you speak the same language as a person or if you have the team that is all speaking the same language. But they also maintain communication throughout the entire process because sometimes the processes themselves will break if the communication is not there. And it's important to communicate with suppliers, with vendors, with logistics companies and everyone in the supply chain. And that's why it's important to keep everyone on the same page. That's where Trek, Mage or any other system can help, where everyone can be in the same view and see the same shipments and communicate around those orders and shipments that they see.

Jonathan Green: So there's the first issue of the right product getting out of the factory. Now, there's a lot of challenges in shipping from China to America. Some people do product by product. They order one unit, ship it to one customer. And there's a lot of challenges because shipping across an ocean takes a long time. And recently there's been a lot of issues with supply chains. And I know that there's been a lot of challenges, for example, with shipping containers, because there's so much shipping from China to America, there's not enough shipping back. And so there's piles and piles of empty containers in America, and there's not enough containers in China. So the prices are going up and shipping is getting really prohibitively expensive. So there's a lot of challenges with shipping that sometimes people aren't prepared for. Like if you have an issue with customs, right, if there's something wrong with anything on your bill of lading or your shipping container ends up at the wrong port, it can be a huge, devastating challenge. Or if the wrong product goes to the wrong customer, which has happened to most of us. Why do those kind of things happen? And how frequent are there shipping issues? Certainly know. Even with something as simple as like a food delivery, I've had someone deliver food to the wrong building, and they say they deliver it, and I say it never arrived. And so there's like a fight even inside one of those app food deliveries. So even with the smallest of deliveries where it's person to person, we can have problems. So how big is that problem? How challenging is it? How likely is someone to have a shipping issue or a shipping surprise if they're dealing with China?

Irina Poddubnaia: I would say that it doesn't really matter if it's just China. The local delivery itself is a challenge because again, it just depends on which shipping company you're using. Some carriers, they just don't perform as well as the other carriers. And that's why you can always evaluate the performance of the carrier of how many undelivered shipments you get or how many issues on customs you get. And even just like direct to consumer shipments, they also have a lot of issues that sometimes they have to go through, like being stuck in customs or being at the post office longer than expected because the customer just simply forgot to collect the package. So the idea would be you ask how likely it is to encounter a shipping issue with a specific shipment, the probability is close to 100%. One thing or another is probably going to go not as expected with good carriers. They are going to mitigate that effort and they're going to make sure that the package is going to get to the containee. But with some not so good carriers, you will have to make some calls and make sure that the shipment gets to the destination. The idea would be to always monitor the performance of all the carriers and the entire shipping volume. Because if you treat your business as this machine where you have multiple shipments going in and out and you need to track the lead time, like how long are you waiting for a specific shipment to be delivered to your warehouse and the lead time to the customer. So how long it takes from this warehouse to the customer, you're going to have a full visibility of that. What I think is the most challenging in the current situation that we are dealing with supply chain issues is that you have to always count on longer delivery times and you have to buy inventory. Previously, it was much easier to do business because you didn't have to stock that much inventory, because you could just count on in time delivery from your supplier from China or from other countries. Right now I would propose for when you entrepreneurs, if you want to start doing business, probably try to source locally. Try to source from some wholesale companies that are in your local region, or try to source from some other entrepreneurs who are not very good at doing business because they will also have excess inventory that you can sell. And there are certainly a lot of opportunities there because again, the junior ecommerce entrepreneur mistake number one is buying 10,000 units of some kind of product because that product is going to sell. I believe in it wholeheartedly. But then if we don't have any distribution channels established, no branding, no paid ads, experience, no nothing, usually they are just left with this inventory in their warehouse and the only thing that they end up with is just some hefty bill from their fulfillment supplier. Every time, like every month passes, they get the stocking fees for that inventory that they cannot sell. And that's why people like marketplaces so much, because you don't have to put that much effort in selling on Amazon or Etsy or Ebay because there is already traffic. But when you are starting your own household brand or some standalone store, it's not as easy as that. You have to always establish some kind of credibility and you have to always have traffic sources to actually sell those products to people.

Jonathan Green: My experience has been, and I live in Asia, that if I order something from AliExpress or Alibaba, it takes about six months to arrive. Even if they say it'll be 15 to 30 days. Yeah, six months to arrive is so normal. I'm used to if I order something from AliExpress, by the time it arrives, it's a surprise because I don't remember ordering it. It's been so many months, full six months, every single time. And I'm in the region, we're very close. It's a four hour flight. And yet it gets stuff gets to America faster. Maybe they have more shipping there or something. If I order an entire shipping container, we get here faster. But I do have so much experience with that. And we often misunderstand how shipping works. The mail in every country is not the same, right? Mail in some countries, like if you send a letter in England, it arrives anywhere the next day. America is not like that. There's no such thing as next day letter, right? It's three or four days later, even if you're in the same city. So every country has these different speeds. And now there's so much of this expectation in America because of Amazon, of like, it used to be next day delivery, now it's same day delivery. You order something Amazon and a drone shows up outside your window. That's what people are wanting. And that's almost impossible to maintain, right? All those drone companies are going out of business because it's almost impossible to land in someone's yard without hitting the dog. But that's the challenge is we've created this expectation or this sense of immediacy that didn't exist when I was a kid. Sometimes you would order something, like from a contest, and it would say, please allow four to six weeks for delivery. Nowadays, nobody would find that acceptable. That's like a shocking number, but that's normal. I remember I won a pair of binoculars from a bag of chips. They're like, oh, we'll send you, and binoculars came six weeks later. Nobody will wait that long anymore. So there is this challenge of we want more immediacy, but the challenges are still there. How do you manage that expectation and balance? How much inventory you need? Because I know some factories will do something, oh, they'll give you a lower price for a certain number. And so you think, oh, if I order 10,000 units, it lowers my cost and increases my profit margin. And people forget, oh, I have to sell 2000 units before I've covered my cost. So what's the right balance? I know some factories also have an order minimum and people get caught up on that one. Oh, you have to order 1000 or 10,000 units minimum because they have to make the mold or they have to make the dye. How can someone navigate those waters? Because I do know inventory can kill so many businesses. Because once you have the inventory, you have to sell it even if no one wants it.

Irina Poddubnaia: Yeah, that's the biggest challenge with the inventory. I wouldn't necessarily agree that the expectation right now is like same day delivery. Not in all cases. So at least I know of quite a few cases where the product is so unique that people are willing to wait for four weeks, six weeks, or even longer if we're just like very loyal to the brand or they want that specific thing from that specific store. And that's why it is such an important thing to create a community or create some kind of strong brand to sell. Because people will endure anything else. Like any other supply chain issues, they're going to endure because they will wait for your product. But that's one part of the equation. The other part of the equation would be to establish a healthy balance of push and pull. In supply chain there is this, it's not an obscure concept but not a lot of people think about it. So in push you always just like you buy those 10,000 units and then you push it to the market, regardless if the market wants it or doesn't. And in pull strategy you first collect the preorders or you collect some payment upfront and then you buy it. That's the typical drop shipping or drop servicing model where you don't even have a product before you sell it. Both models are like 100% pull, 100% push. They both have risks because with a drop shipping model you also run a risk of selling products that even your suppliers don't have. And then you are faced with inevitable refunds and chargebacks because you will just not be able to ship those products in time. So the healthy idea would be to establish something like half half model where you have certain amount of inventory, you sell it as soon as possible, especially if you have a strong marketing presence. You can, I don't know, do something like a launch of a product and then you just sell everything that you have in stock, but then every other order that comes after that you can collect preorders and then you can fulfill those orders later. So there are a lot of things that you could do with it and like finding how many units you can sell without any problems or without having to stock those boxes of inventory in your garage without having any means to sell it. That's the thing that any Ecommerce business needs to start because ideally you should start from generating demand or even testing the demand and seeing if it's already there. Because if you skip that step, the likelihood of you having 10,000 units and all your family members and your close friends getting those units for Christmas, Hanukkah, Easter and other holidays is very high.

Jonathan Green: So I know that you've built the software platform and you shifted. So you shifted from manually doing the Ecommerce and you built software to help your own business and then you realized that the software itself had become the most valuable part of the business. What was that transition like?

Irina Poddubnaia: Well, the transition was inevitable, I would say, because we built a robust system that our businesses could benefit from and we stress tested it with some interesting cases. So we started working with this YouTube influencer. They are creating their own animated series, they're called Metal Family and they gathered a community of 3 million people whom they are selling the merch like the merchandise to. And once they launched the comic book, the demand was so fierce that they sold the entire batch that they printed not in two months as they expected, but in one week. And then they had to fulfill all that. They encountered a lot of problems with that because when you don't have any automation in place. That's a very demanding task to send a tracking number to every person in 10,000 orders. And it's a very demanding task to even keep track of all those orders and making sure that you don't mix and match, like, one thing that you shipped to one city to the other. And that's when we introduced Trackmage, because Trackmage actually handles those updates to the customers automatically. So they stopped getting hundreds and hundreds of emails like they used to asking where the order is because they already knew. Another thing that we fixed was that a lot of customers, since the audience was predominantly immature, it's an animated series, it's a cartoon. A lot of customers, they filled in their email address with typos. That's why they were not getting any updates even if they wanted to. So we fixed that part as well. So now only emails that are valid are getting probably checkout process. And another thing that we helped on text is that they were not even asking for reviews. After all this turmoil, they had to go through to ship a product and make sure everything is okay. And once they started asking for reviews, trackmage collected 2150 reviews from those 10,000 orders that were shipped, which actually accounts for every fifth customer left a review. And reviews were predominantly five star.

Jonathan Green: So you mentioned a couple of things that are very interesting because in my business, the number one cause of a customer complaint is they misspelled their own email address. It's very common. Probably one in ten support requests is about this very issue. And those are the angriest emails I get. Like, how dare you? Yada yada, you took my money. You haven't done anything. You haven't emailed me. And I look, and as soon as I say, oh, sorry, you misspelled your email address, we've now fixed it. They're so embarrassed, the anger goes away. But it is a surprisingly high percentage of time. And I've also done it now. I'm just as guilty now when I do it. I'm aware sometimes my finger mistypes the character, I miswrote an address. It was supposed to say Golf and it said Gold one time like a few months ago. So it happens to the best of us. So that's very interesting because I didn't even think about that. But how often is a shipping issue caused by an error on the customer's end? They miswrite their zip code, they put in the wrong country, they misspell a letter. Because I know, for example, in Atlanta, there's 50 streets that all have the word Peach in the name. And so if you don't have Peach Street instead of Peach Lane, then you end up with a completely different address. So how often does that happen?

Irina Poddubnaia: I wouldn't tell you the exact number across the whole industry, but I can tell you, at least in this specific case of Metal Family, they had this issue in every. Third order, like one third of the entire shipment volume had issues because of a misspelled name or missing city or misspelled zip code or whatever else. And sometimes the customers, they fill in the information. It's not like they do it intentionally, but sometimes they fill it in for their friends or their acquaintances that they want to make a gift to and they just don't know the correct details. And that's something that validation on the checkout actually helps fix. And an interesting point would be that email validation and address validation, it's something that businesses that are not even ecommerce but sell digital products. You can also use Rack mage as means to check the email addresses because what we did, we created this script that is universal. You can put it on any opt in form, you can put it on any website that you use on ClickFunnels, on checkout on WooCommerce, whichever place you are currently collecting emails through. And what it does, it actually checks if that email exists on the server. So it pings the email and also it suggests the correct spelling of, for example, the person is entering Gmail, like with GMAP instead of GMAP is going to say, oh, you have a typo, did you mean Gmail? And that's exactly what the script does. And this way you can prevent this issue entirely. And the other upside of using this script is that you are going to see zero bounce rate on your email autoresponder, which is a big deal because with bounce rates going up, usually the accounts get worse. Deliverability or even some issues from an email provider.

Jonathan Green: Yeah, as my business has grown, deliverability has become so important in realizing that people misspell their email address. And sometimes people, they misspell their email address, they realize and they reenter with the right email address. I know I have two email addresses for them and that's very interesting. I understand that validation process, checking to see if it exists. I know that some services I deal with, they send you an email and you have to click the link in the email to make sure you put in the right email address. And that's a pretty complicated process. It only works if you really want something.

Irina Poddubnaia: The double opt in. Yeah, this is not like that. We are checking the email while it's still on the form, while the customer is still entering that email. So it's not the double opt in.

Jonathan Green: Yeah, no, that's why I think your system is in the double opt in problem is it breaks the shopping flow because they're about to place your order. I'm ready to give my credit card information. Like no, you can't give a credit range first, prove your email address is real. I could see that really killing sales. So this validation is interesting because it doesn't lose the momentum. But how do you do the address verification? Is that the same thing with an online verification seeing if it's in the postal service database.

Irina Poddubnaia: Actually, it just pings the server. So that email is legit because it's almost like the text side. It's a little bit complex to explain it right now, but again, the text side simply is that we are paying that email and we are making sure that it actually exists on the email server. If it doesn't exist, it's not going to reply. But we are not sending anything to that email to do that. It's just like this server side validation.

Jonathan Green: But how do you validate physical mailing address for shipping something to someone's house? What's, that validation process?

Irina Poddubnaia: Yeah, so that validation process is not currently available for the public. So we are still developing that feature. But in case of Metal Family, we were just implementing it on site and we've been using the available addresses from Google and from Microsoft, I guess. So we're cross checking the two databases to check that the address actually exists. And then we also offer some autocorrect for specific zip codes or specific CDs. That's exactly how it worked.

Jonathan Green: That's very interesting because what I've dealt with is that when I look in my address in the last few houses I've lived in, the Google Pin is in the wrong place. And it's really hard to convince them to move it. Sometimes they're like, oh, you live in the middle of the ocean. Like, no, I definitely live on the land. Or you live in the middle of the woods and it's like, no, I live on the road. So in remote areas, I know that it's still catching up. And I know having lived in Japan, japan doesn't have street names. They just have a neighborhood. Then your house is just in the order in which it was built, so they're not even sequential. And I remember it was so hard when I lived in Japan to get mail because you have to know the neighborhood because there's no logic to how they're numbered, just an order of construction. So in a lot of areas, it's really challenging when you're shipping to different countries. So having automated service, it kind of fills that gap.

Irina Poddubnaia: Yeah. This is in China. We know sometimes you show like the Chiral Glyphics to the Chinese person and they just say, I don't know. And then you try to find it on the map. They don't know. And sometimes we were just suspecting instead of the address, we were getting something like, turn to the right on that letter to the upstairs. So it wasn't an address that we were looking at, but we couldn't sell the difference between if it was legit or not.

Jonathan Green: Yeah, so I guess you really do understand that problem. So I know that it's amazing to have a tool that solves that issue because I've been doing this for 13 years, so many times an email issue or a shipping issue, and I'm not even doing physical products. So that makes a lot of sense to me. I think that's a really useful tool. We've created a special link for people that want to check out. I know we have a free trial right now@servemaster.com trackmage I encourage people to check it out. It's very interesting. I know that it can help people improve conversion rates, improve getting the kind of review process and the shipping process is hopefully people have rise from this conversation. A lot more complicated than we first think. I love watching documentaries about how mail works in America. There's an entire team that sits just in cubicles looking at addresses to see what the computer couldn't understand and they're constantly trying to resort so even with all of our computers, there are still issues where people misspell or they write the end backwards or the letters are strange. So it is a bigger issue I think than we realize until it happens. There's often this desire to wait until there's a problem before we fix it. So I think that it's really worthwhile to check out what this tool can do and see how important validation can be. Whether you're looking at email or physical mail. Because if you get the wrong email address without realizing it, it can affect your deliverability, it can affect your account. There are actually spam traps out there. Servers create fake email addresses for the purpose of testing to see if people are sending to unauthorized email addresses. And it can really hurt the reputation of your website without you realizing it. So these are some really powerful tools. Very very interesting. Thank you so much for giving us so much of your time. Irina, I really appreciate you being here. Thank you very much and again everyone@servemaster.com trackmage. Thanks for listening to today's episode. I love podcasting and it's never too late to start your amazing podcast. Get started with my free guide@servemaster.com checklist.

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