According to a report released in July by Business Insider, San Diego — specifically the Carlsbad area — is the 11th top city in the nation for startups. Phil Gorman, founder of E-COMMevents LLC, believes the reason for this is the city’s strong military presence.
“We are all familiar with the cost of living in San Diego. If you think of the military community and people exiting service, when they are done, they often try to figure out how to stay in town, and that usually happens by starting their own business on the side,” said Gorman, who worked as a small business advisor for American Express in the past. “Or, maybe they are retiring, which (accounts for) a nice-sized population of military folks getting into (startups). The thought is, how do I make extra money without setting up a booth at the swap meet?”
This is what inspired Gorman to launch E-COMMevents and its inaugural event, “E-Commerce Day”, to be held on Oct. 17 at the San Diego Marriott Del Mar from 8 a.m. to 5 p.m. Some of the topics that will be discussed at the all-day ticketed event, according to Gorman, are issues that the local startup community faces when launching their own businesses, including financing.
For startups, Gorman said, the business owner doesn’t usually go the venture capital route, although some have and it is certainly an option. An alternative, he said, is getting capital strictly for advertising. There is a company based out of Canada called ClearBanc that “will give companies’ money just to spend on advertising,” he said. “It isn’t a loan, it’s not venture capital, it’s just a percentage of the upside, which is 6%.”
ClearBanc will fund $1 billion to e-commerce companies in 2019 alone just for marketing, Gorman said.
Gorman also said that about a year ago, it became possible for those wanting to launch an e-commerce business to get a Small Business Administration loan (or SBA 504 loan) at 10% down. That’s another useful financing tool, said Gorman, that is more effective than draining a 401(k) or family money.
Additionally, there are a lot of applications available to help e-commerce businesses meet their needs, said Gorman. While Canada-based Shopify is possibly the largest e-commerce platform after Amazon, he said, San Diego-based Sourcify is an intermediate company that will help connect businesses with manufacturers abroad, whether that is China or Mexico. Gorman added that manufacturing options aren’t limited to China, although the quality of products coming out of there tends to be higher.
In addition, ShipCalm, located in Vista, helps startups figure out shipping solutions and fulfillment, which Gorman said is, by far, one of the biggest challenges in the e-commerce industry. Another major hurdle is driving traffic to the e-commerce site.
“People think, ‘you know what? I am an expert in helping older people age gracefully. I will sell products from China that make aging easier.’ But it just isn’t that linear,” said Gorman, adding that data shows for every 100 visitors on an e-commerce site, only two will actually make a purchase.
“So, what do you say to the other 98 that leave?” he asked. “Online, you leave a digital fingerprint and you can keep talking to people, per se, like through ads that stalk you for a while. It is understanding consumer behavior and converting traffic you do get into sales. And, there are best practices and dos and don’ts on how to get that done.”
The influencer market is also another aspect of the e-commerce business that can be tricky, said Gorman. People may think throwing money at an influencer on Facebook or Instagram will automatically translate into sales, but, that isn’t always the case, he said. There are software tools that can help sniff out those social media influencers that don’t perform well and that truly gauge how engaged their audiences are, said Gorman.
At the end of the day, there are a couple of things that any person trying to launch a startup e-commerce business should do first, he said. One is use Google to do research. And two, make sure the margins add up.
“You need money to pay for people, for marketing, etc,” he said. “The margins have to be there.”
Lastly, Gorman said he advices entrepreneurs to represent someone else’s product in the space they want to be in first, as an affiliate or an ambassador or even a sales person, sometimes for commission. There won’t be the requirement of having inventory or buying supplies, but the person will get to test the waters by representing another person’s product in the world they hope to go in, he said.
“What I love about the e-commerce business is that it changes every day,” said Gorman. “You might get 1,000 visitors today, and the next day it will be something else. And then the next day, Kim Kardashian is waving your product around on Instagram and you get a million hits.”
For the E-Commerce Day event, Gorman said he anticipates 300 attendees. He will be accompanied by the likes of Steven Ford, founder of Sand Cloud, a San Diego-based e-commerce towel business founded in 2014 that is now making north of $10 million in revenue annually, according to Gorman. Representatives from HeadHunter, also a San Diego company which manufactures sun protection specifically for the surf community, will be guest speaking at the event as well.