Alan Cole Of GovX: 5 Things You Need To Know To Create A Highly Successful E-Commerce Business

An Interview With Eric Netsch

Build a Great Team: Stating the obvious here. Your team is making decisions every day that impact your customers. They need to be aligned with your mission and ready to take ownership of the solution.

As a part of my series about the “5 Things You Need To Know To Create A Highly Successful E-Commerce Business”, I had the pleasure of interviewing Alan Cole.

Alan Cole is a seasoned eCommerce executive with over 25 years of experience leading businesses in the internet sector. He is currently the President and CEO of GovX, a membership-based eCommerce site built for those who serve our country and communities. Alan earned a BS in Civil Engineering from Santa Clara University and received his MBA from the University of Texas at Austin.

Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?

I earned my undergraduate degree at Santa Clara University — which is nestled in the heart of Silicon Valley. After working as a Project Engineer for a couple of years in Palo Alto, one of my classmates and I moved down to San Diego to start a ‘web development’ business. The web was still so young when we started the company, and we found a niche building dynamic, database-driven sites, which was a novel feat at the time. After running the business for nearly ten years, I realized there was so much I still needed to learn from a business standpoint, so I headed back to school to get my MBA at the University of Texas at Austin. UT has such a great program for entrepreneurs, and it allowed me to get practical work experience that filled so many voids I didn’t even know I had. During my time in Austin, I worked for an early-stage Venture Capital Firm and also worked at several local startups in a variety of sales and marketing roles. This experience translated well when I headed back to San Diego and took a job at The Active Network — a venture-backed online registration company that was growing fast. For most of my tenure at Active, I was responsible for the consumer media properties, which set the foundation for my subsequent roles. Prior to joining GovX, I was the COO at TakeLessons, another venture-backed company that built a platform to match students with private instructors. The company was at a much earlier stage, which allowed me to develop my operational toolkit and prepare me to step into my current role. I have been the President and CEO at GovX for over five years now. Even though I have been in the eCommerce space for over two decades, there is always more to learn, especially in the current environment.

What was the “Aha Moment” that led to the idea for your current company? Can you share that story with us?

The first company I founded was 25 years ago — a very different time in this space. The “Aha Moment” was really when I was trying to build my own website and realized there just weren’t many agencies at the time that could help businesses invest in this space.

I’m not the founder at my current company, I was hired nearly six years ago to help scale the business. GovX was founded through the recognition that eCommerce companies weren’t doing a very good job of creating a differentiated value proposition for those who serve.

Can you tell us a story about the hard times that you faced when you first started your journey? Did you ever consider giving up? Where did you get the drive to continue even though things were so hard?

Things are hard in every job. The difference when you’re a founder is that you’re accountable to other people (and their families) at a much deeper level. I remember one of my early employees who was buying his first house. I was so incredibly proud, and really, really frightened at the same time. Our ability to pay him, and enable him to pay his mortgage, was on us. And that responsibility is actually what got me and my co-founder through the hard times. It wasn’t just about us anymore. If this doesn’t motivate you as a founder, then you’re in the wrong seat.

So, how are things going today? How did your grit and resilience lead to your eventual success?

For those who are operating businesses, and responsible for constant growth, I’m not sure it ever gets any easier. That may be an overly cynical view, but I have yet to bump into another early-stage founder who said “oh yeah, the wind is always at our backs, we have more new customers than we need, we can always hire the folks we need at a fair price and customer acquisition costs are going down every day.” It just never happens like that. At least, for me it hasn’t. As careers progress, the stakes are just higher, and I suppose that’s what makes every milestone more rewarding. And I’ll let you know when we arrive at that eventual success you referred to!

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘takeaways’ you learned from that?

At my first company, we provided web and tech support for the San Diego Sports Arena. As part of that agreement, we had the opportunity to set up a booth at San Diego Gulls Games. (For technical context — this was in the early 2000’s.) So, we hauled down an early all-in-one Mac, hooked up a Connectix webcam and set up a booth for ‘Email Postcards’. Our plan was to allow people to take a (small, grainy, black & white) photo with the webcam, which we would save, and send to an email address they provided once we got home (no internet connection available at the booth). We would add a marketing message to the email and were hoping to generate some buzz. But, as it turned out, no one could remember their email address! So, the obvious lesson learned was to understand your audience. If we had set that up at CES, it might have been a different story. But we learned a valuable lesson to put yourself in your audience’s shoes. Be aware of the situation and look through the lens of your customers.

What do you think makes your company stand out? Can you share a story?

GovX is truly a mission-driven company. Our core business model is focused on delivering great value to those who serve in many different ways. GovX.com houses the best deals for hundreds of products and experiences in the GovX Marketplace. Our GovX ID verification technology allows other platforms to instantly and securely verify customer eligibility for exclusive discounts on their own retail websites. And what’s even more important is that we invest in supporting a different non-profit every month to go even further towards taking care of those who keep our country and communities safe.

GovX Gives Back is our program that is focused on community engagement and nonprofit advocacy. For example, in May, GovX Gives Back raised nearly $30,000 and donated millions of promotional impressions for the Iraq and Afghanistan Veterans of America. We raise funds for organizations like IAVA by donating 5% of the sales from our private label apparel (GovX Gear) and we donate 100% of our profits from the sales of our custom designed ‘Patch of the Month’. May was particularly successful because Born Primitive (a veteran-owned apparel brand) matched donations, which made an even bigger impact to IAVA.

Clearly, it’s difficult to calculate a direct financial return on this investment for the company. And this is why a clear mission is so important. We’re dedicated to serving those who serve, and that takes many forms. GovX Gives Back supports the community, engages employees and at some level we hope its reason enough for our members to consider shopping at GovX.

It’s just so important to connect with your customers beyond a transaction and GovX Gives Back allows us to create a sustainable point of differentiation that can’t be matched by more generic competitors.

Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?

There just has to be a deeper purpose beyond the economics of the business. Making an impact really matters — even within a for-profit business. This may be surprising, but KPIs and graphs aren’t super motivational over the long-run. At a very real level, leaders need to connect the business back to the individuals they are serving. Are you truly improving the lives of your customers? Set goals to make a bigger impact each year and celebrate those wins with the team. Inspiration is always rooted in the human side of a business. Work itself isn’t the root cause of burnout. Work towards an empty mission and lack of progress is the culprit.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?

I honestly never felt comfortable seeking out a mentor. I’m an introvert — so I don’t learn very well in real-time conversations, I need to digest and process feedback. So while I didn’t have any formal mentors outside of work, I learned a great deal from my managers and peers at every stop along the way by observing, processing and doing. It’s just tough for me to internalize ‘advice’ for some reason. I need to see something in action so I can absorb it. So with that said, I’d have to say that my long-time manager at Active, Jon Belmonte, made the biggest impact in my career. The most important lesson that still sticks with me today is to proactively take care of your team. Fair comp is obviously critical, but more importantly, he taught me to be thoughtful around roles and responsibilities and make sure that great folks are given opportunities to grow. He invested in me as a junior manager and certainly provided the stepping-stones to get to where I am today.

Ok thank you for all that. Now let’s shift to the main focus of this interview. The Pandemic has changed many aspects of all of our lives. One of them is the fact that so many of us have gotten used to shopping almost exclusively online. Can you share a few examples of different ideas that eCommerce businesses are implementing to adapt to the new realities created by the Pandemic?

With all the talk of pulling forward eCommerce adoption, online shopping still only accounts for 15% of total retail transactions. So while the pandemic did drive more engagement with online shopping, recent reports have shown that the engagement is waning, and the far majority of shopping still happens offline. In addition, with “Buy Online, Pickup In Store,” the line between the two channels is blurring every day. I actually believe that the changes related to performance marketing and tracking, which just happened to occur during the pandemic, are having a bigger impact on the eCommerce sector than whatever happened with shopping behavior changes due to the pandemic.

All that said, in the end, all roads just lead back to the customer, and the importance of understanding your segments better than the competition. How do your unique value propositions align with your customers’ values and priorities? Are you creating new authentic touchpoints that connect with your customers where they hang out online? Does your product align well with social engagement? There is an endless list of marketing technologies and optimization platforms. And if they all worked as well as they claim, this would be an easy gig. But the reality is they only work as well as the company’s value proposition. Nail that first.

Amazon, and even Walmart are going to exert pressure on all of retail for the foreseeable future. New Direct-To-Consumer companies based in China are emerging that offer prices that are much cheaper than US and European brands. What would you advise retail companies and eCommerce companies, for them to be successful in the face of such strong competition?

I love Amazon. When my family runs out of toilet paper, Amazon will drop a few rolls on our front lawn within the hour. But when I’m looking to discover great products from really cool brands, Amazon is the last place anyone should look.

Even though our entire business model is based on offering the best prices to those who serve, I’ll be the first to say that you can’t compete on price. While price may be one input, the overall experience has to win a customer’s loyalty. Just like when you walk into a store, eCommerce sites have a very distinct feel, and you can immediately tell if you’re in the right place. This is why Nike pulled their products off of Amazon, it wasn’t a fit for their Brand.

Beyond creating a unique experience, eCommerce companies need to really focus on building trust. It’s common knowledge that the big sites have an issue with fake reviews. There are entire economies built on generating fake feedback. On GovX, since every shopper has to verify their eligibility to join, we can verify that reviews come from a real person who purchased that product. In addition, our customers know exactly who they are buying from when they shop at GovX and they know they can talk to a live person in the US if they need help. This matters to our audience. Trust is paramount and small companies can do this better than the big guys and international knockoffs.

What are the most common mistakes you have seen CEOs & founders make when they start an eCommerce business? What can be done to avoid those errors?

This will come as a surprise to no one: most founders overstate customer lifetime value and understate customer acquisition costs. More specifically, they underestimate how long it will take for a customer to deliver a specific margin target. In addition, they don’t include ALL costs required to convert a new customer and to compound the issue they typically overstate the conversion rate at every step of the funnel. Don’t get me wrong, optimism is really important. The team has to believe in the business model. But the model has to be rooted in reality. Some really insightful advice I read years ago on this topic really boiled down to one line “there is no such thing as magic” — and that’s what most growth plans are based on.

It’s just so important to be honest with yourself. CAC vs. LTV is everything. If it’s not working in the earliest of stages when the spend is low, it certainly won’t work later. And if you’re competing in the same areas as every other company trying to speak to that customer, the road doesn’t get any easier.

Founders need to be honest with themselves in regards to whether or not they have a product that WILL generate an attractive LTV. Without using some crazy logarithmic scale, what will customers contribute (in MARGIN) in 1, 3, 5 years? Are expectations on repeat purchase rates / retention rates in line with the industry? What research has the founder done to validate this? What product line extensions will the company invest in to increase that value in future periods? Are the COGS increasing in this sector? How will that impact LTV Margin in future periods? Before anything else, a realistic view of customer contribution must be clearly articulated.

And once you nail down a realistic LTV, figure out what you need to spend (in advertising and incentives) to keep customers coming back. What are all the programs that you’ll invest in that are designed to drive repeat sales or catalyze new referrals? And most importantly, what are you going to do that is truly unique to attract customers? Great products will generate buzz and drive the business to a certain level. But once your LTV is squared away, the most important investment you can make is in creative, proprietary acquisition channels. And if you’re reading about new channels on a tech blog, you’re already late to that party. This is where the heavy lifting comes from. If you do enough customer research and build your own proprietary insights on the market, you’ll be on your path to creating a defensible customer acquisition channel. And that might be the most valuable asset you develop.

In your experience, which aspect of running an eCommerce brand tends to be most underestimated? Can you explain or give an example?

Without a doubt, it’s personality. Creating a unique personality for your site, with a distinct tone and voice, is critical to standing out in this noisy market. You need to be authentic, genuine and unique. Many brands in our space have an outspoken, charismatic leader who defines their personality. We have taken a different path and developed a personality through our copywriting, content development, image selection and community engagement. This is so important because it should be a rewarding investment for the team, and an opportunity to make a deeper connection with your customers.

Can you share a few examples of tools or software that you think can dramatically empower emerging eCommerce brands to be more effective and more successful?

This is obviously my opportunity for self-promotion, so I will suggest that all eCommerce brands should work with GovX to create a deeper connection with those who serve and to drive incremental sales volume by leveraging our engaged community. And if you’re on Shopify, you can do all of this with a few clicks using the GovX ID App!

But more generally, there is an endless list of options available to help eCommerce brands, and I’m always hesitant to name specific tools. Back to one of my earlier points, it all depends on what’s important to your customer. We have over a half-a-million products in our Catalog at GovX.com, so for us, search tools are incredibly important. We’re not where we want to be in regards to personalization, but that’s next and really important for a model like ours. Others may find that content production tools are more important for customer engagement. It just goes back to your understanding of the customer. Don’t over-invest in projects and cool new tools if it doesn’t add value to the customer. You’ll probably get a better return on improving what you’re selling, or the experience you’ve created to generate those sales.

The cost of paid ads is at an all-time high. What are some alternative strategies to reach your target consumers that don’t involve paying a third party like Facebook and Instagram?

Before I respond, I’ll share that I’m well aware any response I give will come across as either too generic or just plain unhelpful. And I say that because there isn’t an insightful answer to give. Per my point above, creating a proprietary customer acquisition channel is the most important investment an eCommerce company can make (after the product itself of course). Building, testing, iterating customer acquisition channels has to be approached like a product development effort looking for product-market fit. Facebook/Instagram/Google can be leveraged to accelerate the model and complement growth, but the core acquisition funnel must be unique. It’s a much longer path, but more sustainable (and profitable) in the long-run.

As you know, “conversion” means to convert a visit into a sale. In your experience what are the best strategies an eCommerce business should use to increase conversion rates?

Cut your price by 50%. Just kidding. Sort of. This suggestion just shows that conversion is artificial.

After 25 years, I’m off the “Conversion” bandwagon. All that matters is CAC and LTV. When talking about conversion, marketers really need to look at specific segments, and campaigns, and margin contribution for those segments and campaigns, for any sort of meaningful takeaways. If we run a series of TV ads and it spikes our traffic, creates interest and allows us to retarget new members, we’ll see that as a win…but conversion rates will suffer during that period due to an influx of potentially lower-intent buyers. Conversion rate is not the goal, it’s just an output that is often not all that informative.

Yes, we still report on conversion rates because it makes people feel good when they are going up, and gives folks something to point at when they are going down. But what we’re really focused on is converting specific segments of first-time customers and driving up repeat rates. If orders increase and CAC is within range, but conversion rates go down, it’s still a win. And you guessed it…sales are typically connected back to delivering great customer value in a trusted experience. For GovX, that’s our best strategy for driving up volume (and maybe the conversion rate will go up too).

Ok super. Here is the main question of our interview. Based on your experience and success, what are the five most important things one should know in order to create a very successful e-commerce business? Please share a story or an example for each.

It’s a great question, and should really summarize much of what I’ve shared:

• Deliver Something Unique: As a retailer, we’re selling other company’s products. However, we’re doing this in a way that is truly unique within our community by delivering a differentiated experience that is rooted in authentic support for the community we serve.
• Invest in Proprietary Acquisition: Build new customer acquisition into your core business model. It can’t be an afterthought. Clearly articulate how you will attract new customers in a way that is unreachable by the competition.
• Prioritize Human Connections: Customer retention comes from new offerings, creative presentations, discovery and commitments to your community — all of which trigger an emotional connection with your company that will keep folks coming back.
• Build a Great Team: Stating the obvious here. Your team is making decisions every day that impact your customers. They need to be aligned with your mission and ready to take ownership of the solution.
• Paint a Vision: The daily grind is so hard. Everyone at the company has to be excited about where you’re headed, and you should celebrate the milestones that underscore your progress. A clearly defined vision for the future is so critical for operational decision making and overall employee engagement.

You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

As an entrepreneur, and a father of two teenagers, I would really like to see businesses find a way to hire more kids. It seems like everyone in my generation has some old story about working when they were in grade school. For me, it was a paper route I had when I was in third grade, delivering papers before school around my neighborhood in Arlington, Virginia. That experience taught so many lessons from sales, communication skills, customer service and financial management. Today, it’s extremely hard for a 14-year-old to find a summer job! Early employment opportunities build self-confidence, teach the value of money and reduce idle time during a very vulnerable age — where boredom and questionable judgment can lead to really bad outcomes. By providing more kids with the opportunity to learn new practical skills, contribute to a team, and earn a paycheck, we’ll help them build their self-worth from an early age. And there is no better place to accelerate the learning curve than at a startup.

How can our readers further follow you online?

Feel free to connect on LinkedIn, and be sure to check out GovX.com

This was very inspiring. Thank you so much for the time you spent with this!

About The Interviewer. Eric Netsch is the co-founder and CEO of Tapcart, a codeless mobile app builder that helps Shopify’s fastest-growing brands to create an owned marketing channel so that they can reach, engage, convert, and retain their audience without ever relying on another entity for access. Eric has been featured in TechCrunch, Business Insider, The Verge, etc. To launch your mobile app, visit Tapcart.com.