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How to Develop Your Own Hardware Product for eCommerce · Selling on Giants: The eCommerce Marketplace Podcast

• 0:01
  SPEAKER_01: Hey everyone, this is Selling on Giants, the e-commerce marketplace show, where we chat with experts in the e-commerce industry and talk about the latest strategies, insights, and best practices you need to succeed on major e-commerce marketplaces.
• 0:12
  SPEAKER_01: I'm your host, Victor Dwyer, and today we are joined by Kevin Mako, a true pioneer in the world of product development and for physical consumer startups.
• 0:20
  SPEAKER_01: Kevin is the founder of Macco Design.
• 0:22
  SPEAKER_01: Before we dive into how to develop your own hardware product for e-commerce, Kevin, please give us a little intro about yourself and how you got here.
• 0:28
  SPEAKER_00: I'm super excited to be on the show.
• 0:30
  SPEAKER_00: Thanks for having me on.
• 0:31
  SPEAKER_00: I love talking about e-commerce, especially these days.
• 0:34
  SPEAKER_00: You know, it's funny.
• 0:35
  SPEAKER_00: Even just a few years ago, as a design firm owner for design firms specifically for startups and small businesses, we would have the occasional e-commerce brand come to us.
• 0:44
  SPEAKER_00: And then all of a sudden, a few and then many.
• 0:46
  SPEAKER_00: And nowadays it's a huge deal because e-commerce is at the forefront of understanding how to sell product to the market.
• 0:53
  SPEAKER_00: So, what better people to figure out well, what's the next innovation that you can sell to your own audience based on data you know how to realize, based on sales tactics, that you know how to work.
• 1:03
  SPEAKER_00: I really appreciate you being on the show today.
• 1:05
  SPEAKER_00: And in terms of my history, just a very quick background.
• 1:08
  SPEAKER_00: I actually started macro design when I was in high school.
• 1:10
  SPEAKER_00: I incorporated it when I was in business school in 2006.
• 1:14
  SPEAKER_00: And when I graduated in 2007 from a dual degree program, including manufacturing overseas at studying at the University of Hong Kong, I went full-time into this business and was$50,000 in student debt.
• 1:27
  SPEAKER_00: And on a whole bit of prayer.
• 1:29
  SPEAKER_00: Yeah.
• 1:30
  SPEAKER_00: You know, whether it's a bit of hard work or a bit of luck or a bit of industry or a combination of those things, we're still here today doing the exact same thing.
• 1:38
  SPEAKER_00: So it's all about product design, development, and manufacturing for new physical, mass manufactured consumer products for small business.
• 1:45
  SPEAKER_00: And that's it.
• 1:46
  SPEAKER_01: Cool.
• 1:46
  SPEAKER_01: That's awesome.
• 1:47
  SPEAKER_01: And like, let's go through your process a little bit.
• 1:49
  SPEAKER_01: I'm interested in your process to identify because there's one thing about designing a product.
• 1:54
  SPEAKER_01: Okay.
• 1:54
  SPEAKER_01: There's another thing about designing a product that consumers actually need.
• 1:57
  SPEAKER_01: I can make this pen, for example, and I can make it have a bouncy ball at the end, like something stupid.
• 2:02
  SPEAKER_01: Like I don't even know.
• 2:03
  SPEAKER_01: But it's the matter of do consumers actually want that?
• 2:05
  SPEAKER_01: And so, what is your process for creating products that consumers are actually going to want?
• 2:10
  SPEAKER_00: Yeah, that's the beauty about product development today.
• 2:13
  SPEAKER_00: It's faster, cheaper, easier to get new ideas to production, even through methods like short run production or additive manufacturing or pre-selling via Kickstarter, Indiegogo, or even just direct-to-consumer early pre-selling.
• 2:26
  SPEAKER_00: So there's a lot of ways to validate a product idea.
• 2:29
  SPEAKER_00: Interesting thing about your particular audience here today, especially being in the e-commerce world, is as I kind of mentioned before, you have the data, you have the understanding of your customers, you understand the demand.
• 2:40
  SPEAKER_00: In fact, a lot of the e-commerce brands we talk to, they have customers asking for the very thing that they're looking to develop.
• 2:46
  SPEAKER_00: I know you sell this.
• 2:47
  SPEAKER_00: Is it possible to make it like that?
• 2:49
  SPEAKER_00: And those little insights are basically the seeds that are planted in terms of innovation as for you, as the person coming up with these ideas or hearing what those ideas are and thinking how that could apply to your brand and how you could sell them.
• 3:02
  SPEAKER_00: Our job is to build.
• 3:04
  SPEAKER_00: So we typically are working with clients that have a pretty good idea of what the customer wants, or at least a reasonable idea.
• 3:11
  SPEAKER_00: And we've got ways that we can fact check that later.
• 3:13
  SPEAKER_00: But the first things first is we need to have a strong seed that's planted.
• 3:16
  SPEAKER_00: So some sort of either it's a pain point that somebody has themselves, or it's something that, especially as e-commerce brands, they're hearing a lot, whether it's chatter that they're researching, or whether it's direct information that they're getting for their customers.
• 3:28
  SPEAKER_00: And they say, look, I've identified something.
• 3:30
  SPEAKER_00: I realize if I make a product either with this differentiation or this entirely new product, or maybe change how another product works or exists, that there's real value there in terms of at least a starter market for customers.
• 3:42
  SPEAKER_00: So that's step one.
• 3:43
  SPEAKER_00: You've got to plant the seed on the idea.
• 3:45
  SPEAKER_00: Step two is build that product.
• 3:47
  SPEAKER_00: Do a really good job of design, engineering, prototyping, get to the point where you can manufacture that product, but start small and start with an MVP version of that minimum viable product, not sacrificing quality.
• 3:59
  SPEAKER_00: And that's a key difference in hardware.
• 4:00
  SPEAKER_00: You guys will all know it as e-commerce brands, reviews matter and features don't.
• 4:05
  SPEAKER_00: So just because you don't have maybe features that your total addressable market might want to have, that's much less of a problem, especially for a first product, than if you have a product that breaks or is defective or that doesn't adhere to the promise that you created for them.
• 4:19
  SPEAKER_00: So if you focus on MVP, that's what you can do for a relatively inexpensive development budget, relatively inexpensive manufacturing cost, get the first version of your product to market.
• 4:29
  SPEAKER_00: Then you let your customers decide.
• 4:31
  SPEAKER_00: Do they love the product as is?
• 4:32
  SPEAKER_00: Because you're only starting with a small batch, maybe 50 units.
• 4:35
  SPEAKER_00: In fact, if we want to go one step further, give 25 of them away and sell 25 of them.
• 4:40
  SPEAKER_00: So you get a really strong mix between influencers or other maybe industry professionals that you've handed them to, as well as real customers who whipped out their credit card to purchase the thing.
• 4:50
  SPEAKER_00: That is your essentially your check and balance to very quickly iterate based on key feedback, whether it's a problem with the product or maybe even an opportunity that you didn't see.
• 4:59
  SPEAKER_00: Iterate that into your design before you then go into full-scale manufacturing.
• 5:04
  SPEAKER_00: Now that's breaking down a lot of steps into like a very quick framework.
• 5:07
  SPEAKER_00: We can go through what it actually takes to develop it to get to manufacturing.
• 5:11
  SPEAKER_00: But big picture, I think it's important to look at the end state, especially as an e-commerce brand.
• 5:15
  SPEAKER_00: Look at the product that you want to make, plant the seed in terms of what that MVP is, and then think about how you're gonna get it to small production runs to validate and test that theory against real buyers.
• 5:27
  SPEAKER_01: Wow.
• 5:27
  SPEAKER_01: Mic drop.
• 5:28
  SPEAKER_01: Boom.
• 5:29
  SPEAKER_01: I love it.
• 5:30
  SPEAKER_01: That was awesome.
• 5:31
  SPEAKER_01: Yeah.
• 5:31
  SPEAKER_01: Can you go into a little bit about the pre-market before like identifying exactly what the people are actually going to buy?
• 5:38
  SPEAKER_01: So you talked about like the steps of going to before getting to manufacturing.
• 5:42
  SPEAKER_01: I love for you to go into those.
• 5:43
  SPEAKER_01: And for a person that hasn't either hasn't sold on Amazon and doesn't know what to expect or like hasn't gone through the development process before, that would be interesting to see like what would look like for them, but also seeing what these big e-commerce sellers that are like trying to find new products to sell, what they should be doing as well.
• 6:00
  SPEAKER_01: Like all those would be interesting.
• 6:01
  SPEAKER_00: That's great.
• 6:02
  SPEAKER_00: Yeah, lots of good questions in there.
• 6:03
  SPEAKER_00: And I think we could break it down into three key big steps when you look at new product development for a new proprietary hardware innovation.
• 6:13
  SPEAKER_00: There's the ideation phase, which we touched on.
• 6:15
  SPEAKER_00: That's planting the seed.
• 6:16
  SPEAKER_00: There's the development phase, and then there's a manufacturing phase.
• 6:19
  SPEAKER_00: So that's fairly straightforward.
• 6:20
  SPEAKER_00: Ideation, then you go into your development and then manufacturing.
• 6:23
  SPEAKER_00: It's really important to look at those three phases as three key and distinct individual phases that have very important pieces to each of them in order to do the whole process well.
• 6:35
  SPEAKER_00: As you know, there's this adage that hardware is hard, but the reality is it's not necessarily hard.
• 6:40
  SPEAKER_00: It's just people are often confused in hardware.
• 6:43
  SPEAKER_00: There's not a ton of data.
• 6:44
  SPEAKER_00: There's a lot more information about the software world and software development, much less about the product development world, especially in modern times.
• 6:51
  SPEAKER_00: We're talking 2023, 2024 here.
• 6:54
  SPEAKER_00: There's much less in terms of especially how a small business gets a new hardware product to market, let alone how big businesses do it.
• 7:00
  SPEAKER_00: So when we're looking at those three phases, first ideation, that's really just planting the seed.
• 7:04
  SPEAKER_00: That's where you're figuring out based on your data or a whole bunch of other factors.
• 7:07
  SPEAKER_00: Maybe it's just a hunch, maybe it's a pain point that you're having, an invention built out of necessity for yourself, that you come up with that aha moment.
• 7:15
  SPEAKER_00: And if you have that, whether it's through data, through your customers, or through your own pain points or through your own opportunities, consider yourself really lucky.
• 7:23
  SPEAKER_00: Most people only have a handful, you know, typically it's argued anywhere from two to five like good ideas in their lifetime, and probably only a fraction of those are actual hardware product.
• 7:33
  SPEAKER_00: Now, if you're in the e-commerce space, you maybe have a little bit better odds in your favor.
• 7:37
  SPEAKER_00: But the reality is to come up with a great idea doesn't come around too often.
• 7:41
  SPEAKER_00: So that's the seed and that's been planted.
• 7:43
  SPEAKER_00: What we really need to focus on is that middle section, though, the development.
• 7:46
  SPEAKER_00: And this is where a lot of mistakes are made.
• 7:48
  SPEAKER_01: Yeah.
• 7:49
  SPEAKER_01: And like with when it comes down to the development, quick question is like there's the amount of testing you can do when it comes down to testing a product.
• 7:57
  SPEAKER_01: Let's go back to the example of the bouncy ball pen.
• 8:00
  SPEAKER_01: I don't know how that in the world these two things are gonna fit together, but let's just say it's a bouncy ball pen.
• 8:04
  SPEAKER_01: Anyway, so there's the testing phase, which I can give this to thousands of other people, figure out what's gonna work, get their testing, but the amount I test is decreases the amount of time to where I am actually starting to sell.
• 8:16
  SPEAKER_01: So you have the big e-commerce sellers that are trying to find a new product that is going to work well, and the time is the essence of everything that they do.
• 8:24
  SPEAKER_01: And obviously, they can the product immediately put the two things together and then say, hey, I like let's go with it, let's roll, we got to get this going, or they can do it with like testing and making sure getting that feedback.
• 8:33
  SPEAKER_01: What is the balance between the two, between testing the product, making sure it's right for the consumer, and making sure that it has enough testing in place to making sure where it doesn't flaw?
• 8:42
  SPEAKER_01: What's the balance between the two?
• 8:43
  SPEAKER_00: That's a great question.
• 8:44
  SPEAKER_00: I think if we kind of break down what that development phase looks like, that again is an area where most people make the most mistakes.
• 8:52
  SPEAKER_00: That's where if you do things the right way, it heavily increases your chances of success.
• 8:57
  SPEAKER_00: And that is where you start to consider those questions between budget, quality, number of features, speed to market, all those things factor in.
• 9:04
  SPEAKER_00: So big picture when we look at development, the biggest mistake, especially the e-commerce brands make, and you probably know a lot of done it.
• 9:11
  SPEAKER_00: I bet you a lot of listeners right now are thinking this very thing.
• 9:14
  SPEAKER_00: They come up with that idea, they like the idea.
• 9:16
  SPEAKER_00: Their next step is not actually development.
• 9:18
  SPEAKER_00: Their next step is to go to their manufacturer.
• 9:20
  SPEAKER_00: So let's say you are doing that pen that you're talking about.
• 9:23
  SPEAKER_00: Now you've got this pen ball combination.
• 9:25
  SPEAKER_00: Maybe there's an electronic counter in there.
• 9:27
  SPEAKER_00: It's telling you how many pen strokes you've made.
• 9:29
  SPEAKER_00: Who knows, right?
• 9:30
  SPEAKER_00: You've got your pen ball counter and it's there.
• 9:32
  SPEAKER_00: So you go to your existing manufacturer because you're an e-commerce brand, you've sold millions of pens, and you assume they know how to make pens.
• 9:38
  SPEAKER_00: They could probably put a ball, electronics, and a bunch of other things together.
• 9:41
  SPEAKER_00: Well, what is the answer that you get when you go to your manufacturer?
• 9:43
  SPEAKER_00: You say, Hey, I've got this idea and I want to build this product.
• 9:45
  SPEAKER_00: Well, the immediate answer they say is absolutely, we can do that for you.
• 9:49
  SPEAKER_00: And then starts the long, arguous, very expensive journey that leads to this back and forth and tooling and retooling.
• 9:59
  SPEAKER_00: And he said, she said, just a whole set of series of problems to a product that when you get it delivered, it most likely isn't going to be a customer product fit.
• 10:08
  SPEAKER_00: There's gonna be a number of other problems, etc.
• 10:10
  SPEAKER_00: It's very difficult to go to manufacturers with innovations.
• 10:13
  SPEAKER_00: And any, you know, really honest manufacturer that you talk to is going to tell you their job is to produce parts on specification, on budget, and on schedule.
• 10:22
  SPEAKER_00: And the better the manufacturer, the better that they'll achieve those three key criteria.
• 10:27
  SPEAKER_00: What they really don't do, very rarely, unless you're talking some of the largest manufacturers in the world, which really are only reserved for Fortune 50 product companies, but what they really don't do is design, develop, engineer, prototype, test, certify a product for your end customer market.
• 10:44
  SPEAKER_00: So if you can, as a hardware brand, really differentiate that in your head and understand that your designers, design firms, your engineers, those are the ones to develop the product.
• 10:53
  SPEAKER_00: Your manufacturers, the ones to develop the parts.
• 10:55
  SPEAKER_00: As simple as that sounds, that is probably the biggest mistake that e-commerce brands start with until they learn the lesson possibly multiple times the hard way and then realize, okay, I've got the seed of an idea.
• 11:07
  SPEAKER_00: Now I need to properly design and develop this product for my customers in that market that they exist, even in the geography that they primarily exist.
• 11:15
  SPEAKER_00: And that's where we come to the design phase, which we can go into next.
• 11:18
  SPEAKER_00: This is a very critical phase to get you to the point where you can manufacture a great product that's hitting those 4.5 plus star reviews on Amazon or whatnot.
• 11:27
  SPEAKER_01: Yeah, love to get into the design phase.
• 11:28
  SPEAKER_01: That's really fascinating.
• 11:29
  SPEAKER_00: Happy to.
• 11:30
  SPEAKER_00: So let's, I'm gonna actually break out the phases for your typical, let's call it medium complexity, physical, mass manufactured consumer product.
• 11:38
  SPEAKER_00: There are key phases between that idea and manufacturing.
• 11:42
  SPEAKER_00: I'll list them in order and then we'll dive into each one and some best practices.
• 11:45
  SPEAKER_00: The first phase is your ideation and sketch design.
• 11:48
  SPEAKER_00: It's relatively straightforward and it's usually undervalued by the inventor, the founder, but it's actually a really critical time where industrial designers, mechanical engineers, electronic engineers get together with the innovator.
• 12:00
  SPEAKER_00: So that's either the e-commerce brand or if it's a bigger company, it'd be the whoever's at head of the actual innovation or product development.
• 12:07
  SPEAKER_00: That's the time where we're really trying to understand in visual form what that idea is.
• 12:12
  SPEAKER_00: So we talk about your pen with the ball, right?
• 12:14
  SPEAKER_00: So we're trying to figure out, okay, we've got your pen, ball, and some electronics thing that's counting something.
• 12:18
  SPEAKER_00: Well, how does that all to go together?
• 12:20
  SPEAKER_00: What do you actually envision that?
• 12:21
  SPEAKER_00: And that's where sketching is beautiful because it's relatively cheap, it's inexpensive, but you're doing it with fairly seasoned designers and experts to kind of figure out, okay, how logically would this go together using modern design and manufacturing techniques for the market that you plan to sell to, especially if it's the North American market, it's very specific.
• 12:38
  SPEAKER_00: European's going to be different, and you've got all sorts of markets all over the world that are going to have a very different design, both visually and mechanically, depending on how you intend to sell this product and what the product specs are.
• 12:49
  SPEAKER_00: So that's your ideation phase.
• 12:50
  SPEAKER_00: It shouldn't be understated.
• 12:52
  SPEAKER_00: This isn't just like sketch on a napkin sort of stuff.
• 12:54
  SPEAKER_00: This is where I actually get deeper sketching, refining to the point where you love, let's call it the artistic visual rendering of what your product is going to look like.
• 13:02
  SPEAKER_00: From there, you're going to move into true industrial design, which is where you jump into CAD.
• 13:07
  SPEAKER_00: And that might be a bit of a combo.
• 13:09
  SPEAKER_00: You may actually be using some 3D CAD, computer-aided design into the actual sketching, or you're going to start with sketching and then migrate over to CAD.
• 13:16
  SPEAKER_00: It all depends on the type of product.
• 13:17
  SPEAKER_00: If it's got electronics in it, this is when you're starting to build out some of your components selection, figuring out what the actual core parts are, doing your electronics parts research, and trying to put this together into a big package that has the visual design of how it's going to look, the functions of what is in the actual product, the actual parts that go inside it, that's whether it's electronic or mechanical components, that's your components, and then your mechanical engineering, which is how does that all digitally tie together in the CAD.
• 13:42
  SPEAKER_00: So let's call it your skeleton, your internals.
• 13:44
  SPEAKER_00: Those four pieces are the key elements.
• 13:47
  SPEAKER_00: And that is arguably the most important phase of developing any new hardware product.
• 13:52
  SPEAKER_00: Even if it's 80% off the shelf and only 20%, you know, really customized, unique piece.
• 13:57
  SPEAKER_00: That 20% is going to be the vast majority of your hardcore engineering, testing, et cetera.
• 14:02
  SPEAKER_00: It is so important that it's built on a really strong, solid design foundation in manufacturing CAD software, so world-class software.
• 14:11
  SPEAKER_00: That actual CAD model should be the very CAD model that continues to be tweaked and refined through engineering, prototyping, and into and including production.
• 14:18
  SPEAKER_00: If that's done foundationally sound, if that's has design for manufacturing logic built into it, that will save you exponentially larger costs, headaches, time delays, et cetera, in getting to production.
• 14:28
  SPEAKER_00: So that is the conclusion of let's call it the design phase.
• 14:32
  SPEAKER_00: And then it wraps into the hardcore engineering phase, which is our we call engineering prototyping phase.
• 14:37
  SPEAKER_00: That's the gap between design and your first manufacturing run.
• 14:40
  SPEAKER_00: We'll go there next.
• 14:41
  SPEAKER_01: Cool.
• 14:41
  SPEAKER_01: Yeah, I'd love for you to start with that.
• 14:43
  SPEAKER_01: Yeah, that'd be interesting.
• 14:44
  SPEAKER_00: Okay, so now we get into the hardcore engineering.
• 14:46
  SPEAKER_00: And for your typical mass manufactured physical consumer electronic product, or you know, whether it's electronics or non-electronics, it's fairly a similar process in terms of the types of prototypes.
• 14:55
  SPEAKER_00: There's essentially three key phases of prototype.
• 14:58
  SPEAKER_00: First is your, we call it a rough prototype, mock prototype.
• 15:01
  SPEAKER_00: If it's got electronics, it might be a circuit design and combined with what we call a breadboard, which is laying out the components, literally a bench test, trying to actually do the programming there.
• 15:10
  SPEAKER_00: But basically you're mocking together using electronics, basically breadboard technologies, as opposed to doing like detailed PCB design and that sort of stuff.
• 15:19
  SPEAKER_00: So it's a rough layout of the electronics in combination with, let's say, 3D printed parts of the actual product.
• 15:25
  SPEAKER_00: And then eventually, when you have those two, you want to put the two together.
• 15:27
  SPEAKER_00: So this is where you are a little bit further along the lines in terms of having some sort of physical, rough model.
• 15:33
  SPEAKER_00: It's not to do detailing, it's not to perfect the beauty of the product, it's not to work even on a design for manufacturing elements.
• 15:40
  SPEAKER_00: This is really to ensure that the theories that you created in CAD are realistic in human form.
• 15:46
  SPEAKER_00: Does it fit the way you want it?
• 15:47
  SPEAKER_00: Does it feel nice in the hand?
• 15:49
  SPEAKER_00: Is it the right size?
• 15:50
  SPEAKER_00: Does it approximately solve the functions that you want, or does it help with the problem that you're trying to solve?
• 15:55
  SPEAKER_00: That's your rough prototype, and that's a really critical building phase because that's the first time that your digital ideas have become physical on the actual table in front of both the engineers and yourself as the founder and potentially other stakeholders, investors, customers, et cetera.
• 16:07
  SPEAKER_00: From the mock prototype, you move into what we call a mechanical prototype.
• 16:11
  SPEAKER_00: So based on all the theories and everything going well with that first prototype, now you're starting to do detailed engineering work, figuring out the smoothness of the components, how well things work together, the reliability of parts, et cetera.
• 16:23
  SPEAKER_00: That depth of engineering goes into what we call this mechanical prototype.
• 16:27
  SPEAKER_00: That prototype is to ensure that you've got the reliability, the robustness, the product quality that you're looking for.
• 16:33
  SPEAKER_00: That's your mid-stage prototype.
• 16:34
  SPEAKER_00: From there, you go into what we call a final prototype or pre-production prototype.
• 16:38
  SPEAKER_00: This thing you want to be top-notch.
• 16:39
  SPEAKER_00: You want to have ironed out all of those kind of kinks and details and the mechanical and prior prototypes to get to the point where you've got a really nice final pre-production prototype.
• 16:49
  SPEAKER_00: So two things that are happening here: one, you're testing for reliability, longevity, and quality in the way that it's actually going to look, feel, and operate in real production.
• 16:58
  SPEAKER_00: This thing should be pretty much bang on, very close, 95 to 99%, the way the actual final production unit should be.
• 17:05
  SPEAKER_00: So that's on one side.
• 17:06
  SPEAKER_00: On the other side is the customer.
• 17:08
  SPEAKER_00: So this is the first opportunity that you actually have to consider pre-selling.
• 17:12
  SPEAKER_00: This is a major milestone that a lot of crowdfunding folks will use, or even people, if they're not going the crowdfunding route and they're going the pre-sales route, they will use this final prototype to start generating that final customer interest because this thing actually looks and feels and works like the final production unit.
• 17:26
  SPEAKER_00: And with Movie Max, it it literally will seem like you're using the real manufactured product.
• 17:31
  SPEAKER_00: So you don't even have to be in production yet and you're starting to get customer feedback.
• 17:34
  SPEAKER_00: The final thing that's very important in this phase is locking down what we call the DFM, design for manufacturing.
• 17:40
  SPEAKER_00: The DFM in that phase is mission critical because not only are you making the product as is would be as manufactured, but you actually figure out typically with both manufacturing engineers internally with your design folks, but also with manufacturers, manufacturing engineers, precisely how each and every part is going to be made and built.
• 17:58
  SPEAKER_00: And if you do all of that well, then what that really smooths out is the transition between your final prototype and production.
• 18:05
  SPEAKER_00: It should be a smooth journey, some light adjustments, some small things, maybe a part swap or something like that as you go into production, but it's fairly minimal because you've already worked out 80, 90% of the manufacturing engineering that's required to actually start producing that part.
• 18:20
  SPEAKER_00: From there, that's a smooth entrance into producing your first short run of actual inventory to sell the customers.
• 18:28
  SPEAKER_01: Are you an online seller struggling to navigate the complexities of marketplace management?
• 18:32
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• 19:02
  SPEAKER_01: Yeah, and that's amazing.
• 19:03
  SPEAKER_01: And I want to go into the a little bit about the testing phase.
• 19:06
  SPEAKER_01: So once you have your prototype, went through all the design phase, everything else, and you're finally ready for consumer feedback.
• 19:11
  SPEAKER_01: What is the next step then?
• 19:13
  SPEAKER_01: Do you give the product away for free to some of your like potential customers, get them to try it out and get their feedback?
• 19:18
  SPEAKER_01: Like, what is your process for that product testing side of things?
• 19:21
  SPEAKER_00: So we're a big advocate of short run manufacturing.
• 19:24
  SPEAKER_00: A lot of products, especially today, can be done in very, very small volumes.
• 19:29
  SPEAKER_00: So let's say we've got our final prototype.
• 19:31
  SPEAKER_00: We're at that pre-production prototype.
• 19:33
  SPEAKER_00: It's done.
• 19:34
  SPEAKER_00: We love it.
• 19:34
  SPEAKER_00: We've shot some movie magic.
• 19:36
  SPEAKER_00: Maybe we've actually started selling some digitally, right?
• 19:38
  SPEAKER_00: And placing pre-orders so somebody can actually buy this.
• 19:40
  SPEAKER_00: And now we're ready to ship some out.
• 19:41
  SPEAKER_00: And remember, like we talked about before, we're gonna give some away to some key stakeholders.
• 19:45
  SPEAKER_00: So we've got, let's say, that model in mind.
• 19:47
  SPEAKER_00: The next step is to look at short run manufacturing.
• 19:50
  SPEAKER_00: It's not gonna be cost effective on a per unit basis.
• 19:52
  SPEAKER_00: The margins won't be there.
• 19:54
  SPEAKER_00: It's still fairly expensive, but it's a nice little stepping stone without having to pay for like hardcore expensive steel-cut tooling, et cetera, for full-scale production to make a smaller amount of units.
• 20:04
  SPEAKER_00: Even if it's a balanced approach, let's say there's one part that you have to tool for, you tool for that part, but then the rest of the parts you'll do through additive manufacturing, subtractive manufacturing, or a variety of other techniques, vacuum forming, you name it.
• 20:16
  SPEAKER_00: There's a whole bunch of techniques right now that can produce in low volume.
• 20:20
  SPEAKER_00: It can be done locally.
• 20:21
  SPEAKER_00: You can do it in the US, it can be done overseas.
• 20:23
  SPEAKER_00: It could potentially be done with your existing manufacturer or with specifically a short-run manufacturing partner.
• 20:27
  SPEAKER_00: The point being is you're trying to make your first, you know, round number 50 units.
• 20:31
  SPEAKER_00: It could be different for different markets.
• 20:33
  SPEAKER_00: It might be five for one, 500 for another, but it's a small amount of units without paying for some of the capitally intensive costs of full-scale production.
• 20:40
  SPEAKER_00: Those are the units that you want to use in the testing that you're talking about.
• 20:44
  SPEAKER_00: And you're gonna try and test for two really critical things here.
• 20:47
  SPEAKER_00: One, product market fit.
• 20:48
  SPEAKER_00: Your clients love it.
• 20:49
  SPEAKER_00: Is it solving the problem you thought of?
• 20:50
  SPEAKER_00: Do they want that ball on the end pen with the counter?
• 20:53
  SPEAKER_00: Are they loving it or are they not loving it?
• 20:55
  SPEAKER_00: Right.
• 20:55
  SPEAKER_00: So that's number one.
• 20:56
  SPEAKER_00: Product market fit.
• 20:57
  SPEAKER_00: On the other side, manufacturing quality.
• 20:59
  SPEAKER_00: You want to make sure that they say, hey, we got this thing and it works as promised.
• 21:02
  SPEAKER_00: We love it.
• 21:03
  SPEAKER_00: It fulfilled the promises that you made in terms of the mechanical obligations of the product, right?
• 21:08
  SPEAKER_00: It's not breaking, it's not falling apart, variety of other things you want to make sure are working absolutely top-notch, more important today than ever before.
• 21:15
  SPEAKER_00: And with that starter market, that's what gives you such confidence as you go from that first 50 units to your full scale production because it gives you this moment where you can take product market fit feedback as well as manufacturing engineering feedback, do those tweaks and refinements, then go into your full scale production with a ton of confidence that you've got a product that people want and that it's working really well in production.
• 21:37
  SPEAKER_00: In fact, it's going to be even improved with those final tweaks you're making before you go into full production.
• 21:41
  SPEAKER_00: If you do this process, this is what prevents so much of those horror stories that you hear about of people going to production or having to go to a tool up multiple times to solve so many of the headaches that could have easily been resolved earlier, both on product market fit and on manufacturing, right?
• 21:56
  SPEAKER_00: Front end and back end of a product.
• 21:58
  SPEAKER_00: You could do all that through your design engineering.
• 22:00
  SPEAKER_00: Engineering logic as you're building in.
• 22:01
  SPEAKER_00: And at the end of the day, you'll have a world-class product.
• 22:04
  SPEAKER_00: That is what is so important for your brand, for your product, for the success of the actual product itself, for the reviews that you get online.
• 22:11
  SPEAKER_00: You can see how this becomes a snowball and it just starts to roll and roll, right?
• 22:15
  SPEAKER_00: If you do it correctly.
• 22:16
  SPEAKER_00: Yeah.
• 22:16
  SPEAKER_01: And I think there's an important point on not only is it solved their problem, are they willing to pay the price that you would actually be profitable for that amount?
• 22:24
  SPEAKER_01: I think that's an important question to ask.
• 22:26
  SPEAKER_01: Like I can have this ball pen thing, but if it costs five dollars to manufacture, and then I have to sell it for$15 with everything, and saying, Would you be willing to pay that?
• 22:36
  SPEAKER_01: And if they say no, that's super critical.
• 22:38
  SPEAKER_01: Like you have to, when you get the your product testing phase, you have to see like, would you be willing to pay this price and then to solve their problem?
• 22:45
  SPEAKER_01: And if it doesn't, that's an important piece as well.
• 22:47
  SPEAKER_00: So I'll tell you something interesting on the price side of things too, just from seeing so many of these innovations, and especially with e-commerce brand clients.
• 22:54
  SPEAKER_00: A lot of e-commerce folks are super price sensitive onto the selling price, right?
• 22:59
  SPEAKER_00: Because to be honest, you guys have been beat up.
• 23:01
  SPEAKER_00: You might be competing with five to 10 other people selling the exact same thing.
• 23:05
  SPEAKER_00: So you're trying to beat them on your marketing efforts, on the actual on-page conversions, on maybe your shipping times, on whatever, a number of factors that you say, hey, we're the better one.
• 23:14
  SPEAKER_00: And price is obviously a big one in that, right?
• 23:17
  SPEAKER_00: So if somebody's 10 cents cheaper, 1% less, then they get the click and you don't.
• 23:21
  SPEAKER_00: It's very competitive for a lot of, especially dropshippers or resellers or that sort of stuff, where you really aren't selling something that's overly innovative.
• 23:28
  SPEAKER_00: Of course, the first level of innovation that so many brands tried is, well, let's add a brand value to this, right?
• 23:33
  SPEAKER_00: Well, that's good if people know who your brand is.
• 23:36
  SPEAKER_00: But for the vast majority of, I would say small and even medium-sized hardware brands out there, typically your brand power currently doesn't have as much weight as it might over time.
• 23:46
  SPEAKER_00: And people are still more price conscious than they have brand allegiance.
• 23:49
  SPEAKER_00: Again, there's exceptions to these rules and that can change, but the reality is there is a heavy degree of price competitiveness.
• 23:55
  SPEAKER_00: Here's where it changes.
• 23:56
  SPEAKER_00: When you create this innovation, you are the only one with this thing.
• 23:59
  SPEAKER_00: Yes, you're probably competing against other alternative things they might buy that maybe do what yours does.
• 24:06
  SPEAKER_00: But if you've created an innovative and unique product, even if it's just five to 10% different, that gives you tremendous edge to the point where price usually is no longer a factor.
• 24:16
  SPEAKER_00: In fact, you could be significantly higher in price, but because you're slightly better or because you solve a pain point that the other product doesn't, you lever that on a worldwide basis and you first target your must-have buyers or your wealthy buyers with your innovation.
• 24:28
  SPEAKER_00: You will notice a very refreshing change.
• 24:30
  SPEAKER_00: It's like if you were the first person to buy that dropship item before anyone was on Amazon, you're crushing it, and then all of a sudden everyone came in.
• 24:36
  SPEAKER_00: You remember that feeling you had?
• 24:37
  SPEAKER_00: That's what you'll have, but for a much longer period of time, if you actually create your own intellectual property, you create your innovation, your invention, your idea.
• 24:45
  SPEAKER_00: You control that and you control the price and you control the length of that price over time.
• 24:51
  SPEAKER_00: So you can start with your must-have buyers.
• 24:53
  SPEAKER_00: And then as you're achieving economies of scales on the manufacturing front, you could start decreasing your price to start hitting the more price conscious buyers, typically the larger market mass.
• 25:01
  SPEAKER_01: Wow.
• 25:01
  SPEAKER_01: Yeah, that's super valuable.
• 25:03
  SPEAKER_01: That's really valuable.
• 25:03
  SPEAKER_01: And I wanted to get into this because you might know a lot about it.
• 25:06
  SPEAKER_01: Manufacturing in China when it comes to stealing your idea.
• 25:10
  SPEAKER_01: I knew a lot of people that would say, Hey, Victor, I want to go into manufacturing in China.
• 25:15
  SPEAKER_01: It's way cheaper.
• 25:16
  SPEAKER_01: But as soon as I do it, my product gets stolen.
• 25:18
  SPEAKER_01: They go on Amazon for the exact same product, and the product gets stolen because their manufacturer sells it to someone else in China.
• 25:24
  SPEAKER_01: And then they also from there they'll sell it on Amazon.
• 25:27
  SPEAKER_01: And every innovation that they do, it gets stolen by sending over from China.
• 25:32
  SPEAKER_01: So, what is your strategies to make sure that doesn't happen?
• 25:35
  SPEAKER_00: Yeah, so there's a lot of very tactical strategies.
• 25:37
  SPEAKER_00: Again, you should be working with a really good IP protection.
• 25:40
  SPEAKER_00: So any kind of patent attorney that really understands international patent law and international contracts with manufacturers as well.
• 25:46
  SPEAKER_00: That's like let's call it your legal defense.
• 25:48
  SPEAKER_00: You're gonna have a very direct, let's call it partnership of defense where you're working very closely with hopefully specific factories that you either have experience or are well referred or are used to dealing with proprietary technology that have internal processes in place.
• 26:02
  SPEAKER_00: And then more important than ever, you want to beat them by being first to market, best to market, and protecting via brand.
• 26:10
  SPEAKER_00: We talked about brand earlier.
• 26:11
  SPEAKER_00: The bigger your brand gets, the more power that actual brand has as being the first mover and so on.
• 26:16
  SPEAKER_00: You can always go after the resellers as well.
• 26:18
  SPEAKER_00: You know, I don't want to get too much into it because it's a whole legal debate.
• 26:21
  SPEAKER_00: But the reality is, is if you are protecting your product, it is truly innovative and you do have patent protection and all that sort of stuff.
• 26:27
  SPEAKER_00: There are checks and balances that you have so that people can't sell into the countries that you're well protected in.
• 26:33
  SPEAKER_00: There are even protections in China.
• 26:35
  SPEAKER_00: I know people say that it's difficult, but know that there are protections there.
• 26:38
  SPEAKER_00: There are lawyers that fight that fight.
• 26:40
  SPEAKER_00: And if you truly are getting so ripped off that it ruins your business, then there are avenues that you have.
• 26:46
  SPEAKER_00: That is a tough world and it could be big bucks.
• 26:49
  SPEAKER_00: So the reality is be first to market, do a great job of it.
• 26:52
  SPEAKER_00: Know that even if that if somebody's trying to rip you off, they're gonna have a long time trying to reverse engineer that product.
• 26:58
  SPEAKER_00: It's not as easy as a lot of people think.
• 27:01
  SPEAKER_00: Reverse engineering something, maybe if it's like super, super simple and very straightforward, but then it would be very strong in terms of your enforceability for the patent.
• 27:09
  SPEAKER_00: So, you know, you'll have a strong protection on one side, but on the back side, if it's anything other than a relatively simple product, there's a lot of work that goes into the details.
• 27:16
  SPEAKER_00: So they're gonna have to hire a really well-versed design and engineering house that tries to reverse engineer it.
• 27:22
  SPEAKER_00: If they're anybody that's even somewhat reputable in the industry, they won't touch a reverse engineer project, a 10-foot pole at all.
• 27:29
  SPEAKER_00: Like you just wouldn't, you will not have any involvement to do with that sort of a project.
• 27:33
  SPEAKER_00: So they're dealing with these like shady operations and they're trying to hack it together.
• 27:37
  SPEAKER_00: And as you will find, especially if it's like a medium to highly complex project, you'll notice those products when they come out and they're half the price and they've ripped off a number of things.
• 27:46
  SPEAKER_00: First of all, they're not as good.
• 27:47
  SPEAKER_00: They simply are.
• 27:48
  SPEAKER_00: They're not getting the four and a half, five star reviews that you're getting.
• 27:50
  SPEAKER_00: Second of all, they don't last for long because there are a number of both legal and business things that you can do to protect that.
• 27:58
  SPEAKER_00: So, again, there's exceptions to all these rules and whatever else, but the reality is I wouldn't be stopping a multi-million dollar venture because I thought maybe, you know, some ankle biters are gonna pick away at some low quality market share in the future.
• 28:12
  SPEAKER_00: Who cares?
• 28:12
  SPEAKER_00: If you're that big and you've done that well, yeah, there's gonna be a whole counterfeit market on your product.
• 28:16
  SPEAKER_00: So what?
• 28:17
  SPEAKER_00: Beat them by doing the right thing and building an empire.
• 28:19
  SPEAKER_00: Louis Vuitton is still around.
• 28:22
  SPEAKER_00: Just think of that, right?
• 28:23
  SPEAKER_00: They're getting ripped off constantly by massive international conglomerates.
• 28:27
  SPEAKER_00: They're still here, they're still kicking, still one of the wealthiest companies in the world that whole conglomerates.
• 28:31
  SPEAKER_00: So know that, you know, first things first, build your business, focus on that, you know, put a little bit aside to protecting via legalities in other ways.
• 28:39
  SPEAKER_01: Okay, one more question is why should it take a step back real fast and say, if you're a big e-commerce brand, what is the point of developing new products, ideas, and new product lines?
• 28:49
  SPEAKER_00: I would tell you, so I'm gonna go really big picture with this question.
• 28:51
  SPEAKER_00: I love the question, by the way, because first of all, we kind of alluded to it earlier in the show.
• 28:55
  SPEAKER_00: Like you have an amazing advantage in an e-commerce brand simply by information arbitrage.
• 29:00
  SPEAKER_00: So that's one.
• 29:00
  SPEAKER_00: You really you will have better ideas and better understanding of how to sell those ideas.
• 29:04
  SPEAKER_00: So you're in a really good spot to actually build, execute, and be profitable with those ideas that you come up with.
• 29:09
  SPEAKER_00: The second side of it is your own proprietary products and hopefully eventually line of products has significant equity value.
• 29:17
  SPEAKER_00: Equity value is your ability to exit.
• 29:20
  SPEAKER_00: And as you know, as an e-commerce brand, it takes a lot of work to get to a size where you are attracting institutional money.
• 29:27
  SPEAKER_00: So this is bigger level private equity or institutional strategics, you name it, big acquis big exit dollars.
• 29:34
  SPEAKER_00: As you build your own IP, that changes everything.
• 29:37
  SPEAKER_00: Your valuation changes exponentially because now you are not only an innovator of your first idea, you have proven that you have executed on that idea and presumably you've started to execute on more ideas.
• 29:49
  SPEAKER_00: So you become a brand that is very valuable.
• 29:52
  SPEAKER_00: I just had a podcast guest on the product startup podcast, which I host weekly, uh, that's an investment banker that talked about this very thing and said that as you start building products, that creates this insane amount of equity valuation for your products, for your product business.
• 30:05
  SPEAKER_00: So whether you're looking to use funding to scale the business, so it'd be equity growth funding or debt financing, you can get a lot more money for a lot less equity or better debt rates.
• 30:15
  SPEAKER_00: Or if you're looking to exit and you say, look, I want to build this thing to sell one day, like five, 10, 15 years down the road, I want to see that light at the tunnel.
• 30:22
  SPEAKER_00: I want to build something that that creates a legacy to my bank account.
• 30:26
  SPEAKER_00: There is nothing more powerful as an e-commerce brand that you can do than building your own products, your own equity and your brand at the same time.
• 30:33
  SPEAKER_00: So you're building brand equity, which we talked about earlier.
• 30:35
  SPEAKER_00: As your brand gets stronger, as you're developing your own products in tandem, both of those things have a kind of like multiplier effect.
• 30:43
  SPEAKER_00: One feeds the other very much.
• 30:45
  SPEAKER_00: So that's what becomes really attractive for an eventual exit.
• 30:49
  SPEAKER_00: Or if you don't want to exit, this is you know forever business for you, but you want to scale quickly, scale financing then becomes much more attractive for you.
• 30:56
  SPEAKER_01: Cool.
• 30:56
  SPEAKER_01: Yeah, that's super valuable.
• 30:57
  SPEAKER_01: And after everything we talked about, is there anything that you want to add on to what anything could have been about inventory, it could have been about development?
• 31:04
  SPEAKER_01: What do you think?
• 31:05
  SPEAKER_01: Is there anything else that you want to mention that want to go into a little bit more?
• 31:07
  SPEAKER_00: I think just the big, big picture is if you're gonna develop a product, just do it right from the get-go.
• 31:11
  SPEAKER_00: Look at it as spending a little bit more up front to save exponentially more both headaches down the road and also amplify the sales down the road.
• 31:19
  SPEAKER_00: And if you kind of invert that and don't try and cut corners or as we talked about, skip straight to production or do something crazy that is going to lead to a pretty substantial cost or learning lesson.
• 31:30
  SPEAKER_00: You focus a little bit earlier on on really developing out a great product for your market, maybe more than you're used to, especially if you're dealing with just reselling or whatever else, because it's typically fairly low cost in RD or maybe no low cost in RD, right?
• 31:41
  SPEAKER_00: So for an e-commerce brand, you've got to make that gap to say, okay, I'm not just gonna add a new product to my portfolio.
• 31:46
  SPEAKER_00: I'm gonna actually invest in this next one.
• 31:48
  SPEAKER_00: And obviously, I'm not gonna be able to sell that for a little while because I have to develop it and prototype and get it to production.
• 31:52
  SPEAKER_00: But no, this is a long-term play.
• 31:54
  SPEAKER_00: This is something you're looking for two to five years out that's gonna be substantial for you.
• 31:58
  SPEAKER_00: So look a little bit earlier, invest a little bit heavier up front.
• 32:00
  SPEAKER_00: Still do what you're doing on the e-commerce side because that's your cash flow.
• 32:03
  SPEAKER_00: That's amazing, right?
• 32:04
  SPEAKER_00: Again, another major advantage to you as an e-commerce brand.
• 32:07
  SPEAKER_00: But also look at on the other side to say, okay, you need to balance your portfolio a little bit.
• 32:10
  SPEAKER_00: You're selling a lot of other people's stuff, even just start with 10% of that budget going to your own thing.
• 32:16
  SPEAKER_00: Build that over time, try to get to market quickly, iterate, learn from your customers.
• 32:20
  SPEAKER_00: Start simple.
• 32:21
  SPEAKER_00: The biggest mistake when it comes to the structural design of a product is feature creep.
• 32:25
  SPEAKER_00: Remember that.
• 32:25
  SPEAKER_00: Keep your products simple in the beginning.
• 32:27
  SPEAKER_00: Even if you know your total addressable market is much bigger with the full featured version, start relatively simple.
• 32:32
  SPEAKER_00: Spend less money with your design firm or your design partners or your design team.
• 32:36
  SPEAKER_00: Get that first version to market, but without ever sacrificing quality.
• 32:40
  SPEAKER_00: So less features, but make sure those fewer features that you have are done to a world-class caliber.
• 32:45
  SPEAKER_00: Get that to market, learn from your customers, and build that brand portfolio from there.
• 32:49
  SPEAKER_00: That is the ticket.
• 32:50
  SPEAKER_00: Like if you follow that model, you're ahead of the vast majority of product startups out there.
• 32:55
  SPEAKER_00: Plus, you, as an e-commerce brand, you have that extra layer of, again, I love the word information arbitrage for e-commerce brands because that is truly an advantage that you have over somebody who just comes up with an idea for their market.
• 33:07
  SPEAKER_00: They don't have the data that you have, they don't have the understanding on how to sell products like you have.
• 33:11
  SPEAKER_00: And I think once you see the power of selling something that you can control in a small micro market that you control because you created it, right?
• 33:18
  SPEAKER_00: Category pirate, that's life-changing.
• 33:20
  SPEAKER_01: That's amazing.
• 33:21
  SPEAKER_01: Yes.
• 33:21
  SPEAKER_01: Fortunately, that's all we have time for today.
• 33:23
  SPEAKER_01: Kevin, please tell the people, the audience, how to find you, how to find more about your business and everything else like that.
• 33:28
  SPEAKER_00: Yeah, I appreciate it.
• 33:28
  SPEAKER_00: So if you're looking to actually design, develop a product, and you want to offload the design, engineering, prototyping, manufacturing, the company is MacO Design, M-A-K-O, Maco Design, or the original design for manufacturing firm for small business.
• 33:40
  SPEAKER_00: That's all we do.
• 33:41
  SPEAKER_00: We focus very aggressively on the tactical side of things of building an engineering and manufacturing product.
• 33:46
  SPEAKER_00: But of course, we're happy to run through all the strategy with you.
• 33:48
  SPEAKER_00: And if you're just curious for more information on the development side of things, I know this podcast is an amazing product for how to sell and grow the brand.
• 33:55
  SPEAKER_00: But if you're curious specifically about the development, go to the product startup podcast.
• 33:59
  SPEAKER_00: The product startup podcast, uh it's just productstartup.com.
• 34:03
  SPEAKER_00: Every week we've got a high profile guest that talks about specifically how to develop products as a small business in the hardware space.
• 34:10
  SPEAKER_00: And, you know, happy hunting and come up with great ideas.
• 34:12
  SPEAKER_00: And your product might be the next big one.
• 34:14
  SPEAKER_00: So, you know, you guys are the ones with the data and you're you're the best person to make those innovations happen.
• 34:19
  SPEAKER_00: And I can tell you, one last thing I'll leave you with here.
• 34:21
  SPEAKER_00: Big corporations are spending a heck of a lot less money nowadays on RD and a heck of a lot more money on acquisition.
• 34:27
  SPEAKER_00: So if you can prove to them that your innovation, your idea has merit, which you can do on the sales side, that is what they're looking for.
• 34:33
  SPEAKER_00: They're looking to acquire the next hot thing as opposed to develop the next hot thing.
• 34:37
  SPEAKER_00: And we're seeing this across industries and consumer products right now.
• 34:41
  SPEAKER_00: So now, since you know the sales side, now you have the tools for the back end side, you're in the driver's seat and pretty much in some of the best positions to figure out what those innovations are and then get them done.
• 34:50
  SPEAKER_01: Amazing.
• 34:51
  SPEAKER_01: Boom.
• 34:52
  SPEAKER_01: That was great.
• 34:53
  SPEAKER_01: Kevin, thank you so much for joining.
• 34:54
  SPEAKER_01: And this is the Selling on Giants podcast.
• 34:56
  SPEAKER_01: And we'll catch you guys next time.
• 34:58
  SPEAKER_01: Thanks.
• 34:59
  SPEAKER_00: Thanks, Victor.