SaaS Interviews with CEOs, Startups, Founders
1303 Ebay to Amazon Dropshipping Arbitrage CEO Makes $5.4M
17 Feb 2019
Chapter 1: What is the main topic discussed in this episode?
Grind won't stop. Pricing arbitrage really between eBay and Amazon. Launched the company many years ago. Now doing, you know, did it about 4 million bucks in revenue between 2017, 2018. From 2018 to 2019, grew up to about 5.4 million bucks in revenue.
Chapter 2: How did Max Kolysh start his entrepreneurial journey?
Their number one product is called Price Yak. Again, helping sellers identify dropshipping arbitrage opportunities. Put 1,000 customers using the platform today as they look to scale. They're profitable. Only $400,000 raised. Team of 17 in San Francisco as they look to scale.
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn.
Chapter 3: What is Price Yak and how does it work?
Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple of hundred thousand dollars to 2.7 million. I had no money when I started the company. It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers.
Chapter 4: How does dropshipping arbitrage function between eBay and Amazon?
With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Max Cole. She's a serial entrepreneur and investor. After graduating earlier from MIT with a degree in computer science, he started Zinc.io.
That was YC Winter 14, a 20-person startup in San Fran, which now powers tens of thousands of e-commerce companies all around the world. Max, you ready to take us to the top? Let's do it. All right, man. E-commerce is hot. What's Zync do and how do you make money? What's the revenue model? So Zync has four different products.
I won't go into details on all of them, but we basically sell SaaS software and enterprise software to some of the biggest online marketplace sellers. Okay, give me an example of a customer. So a customer could be like a top 100 Amazon seller and they're interested in doing multi-channel selling. So they want to cross-list their inventory from Amazon onto eBay or other channels.
We help them do that. We build software for inventory management, repricing, automatic ordering, that whole suite of things.
Chapter 5: What revenue model does Price Yak use?
And so break down kind of how you focus, and the names you've given these things, Price Yak, Joe Lister, Baiba, you're good, man. We can hear you, no problem. So break down how you spend your time on a daily basis. So you have multiple different product lines. You probably have different cohorts of customers for each product line. How do you split your time?
So me and my co-founder do a good job of splitting up based on product domain. So he's in charge of one of our products and I do kind of the smaller and more, you know, innovation, future focused stuff. So he is in charge of Price Yak, which is our big revenue driver. He's in charge of what? Sorry. Price Yak. Price Yak. Yeah, that makes most of our money for the company. Like more than 90%.
Um, no, about 60% of the total revenue of the company, I would say comes from Price Yak. And I look at kind of the new initiatives. Yeah.
Chapter 6: How has the company scaled and what are its growth metrics?
So, okay. So I'd love to focus on Price Yak since it's your big thing, but you're saying you don't, you spend your time not to focus so much on that. You're on new initiatives mostly? We both do everything. It's the short answer. All right. So on the web, tell me more about Price Yak.
On the website, you say automating dropship arbitrage for eBay sellers, repricing will fill your dropship orders automatically. What's that mean? Yeah. So if you're familiar with dropship arbitrage, it's basically this mechanism of being in marketplace seller without actually having the inventory that you're selling. You just kind of know where to get it.
And so our software automates that whole process. We help you list items from other marketplaces. So one common example is Amazon to eBay.
ebay has millions tens of millions of products amazon has hundreds of millions of products some of those are mispriced and so you can take advantage of that price arbitrage by using our software to list something from amazon on ebay without actually owning it and we do the full stack of all the stuff that could be automated which is cross-listing stuff uh repricing it when it changes price on amazon we change the price on ebay and actually fulfilling the order that's kind of the coolest part is is the automatic ordering we place like 20 to 25 000 orders a day on amazon
So Max, just to be clear, if I see a Home Depot drill on eBay about to go for $32.13, there's an hour left in the auction and I quickly use Pricey, I can see on Amazon that's going for $39.20. There's a $3 arbitrage there if I can do it in a no-touch fashion. I could use Pricey to capture that $3 for myself. Sort of, yeah. Actually, eBay, most of eBay is actually not auctions anymore.
It's almost all buy it now. Less than 10% of it is auction.
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Chapter 7: What challenges does the company face in the e-commerce market?
So it's almost entirely stuff where you'll see that drill for $39 on eBay. And then you, I mean, you're a savvy shopper, so you're going to check all the different marketplaces. But most people actually don't. And it turns out you can get that drill for $31 on Amazon. And so that's what a lot of our sellers do. they'll sell it for 36, 37.
And so in a way, it's similar to financial markets arbitrage, which is like the oldest arbitrage in the book, where you'll take stocks from two different exchanges and arbit them out. This is the same thing, except with hundreds of millions of consumer goods. So Max, let me ask you, this feels like an obvious question to me, but maybe I'm stupid and there's an obvious answer.
Why do you need these people? Why not just do the arbitrage yourself across hundreds of millions of goods? Yeah. So my co-founder was actually one of the biggest arbitrage sellers when he was in high school. And that's kind of where part of the origins of Zinc came from. So that's a good question.
Chapter 8: What future plans does Max have for the company?
We get that a lot. The main reason is that there's a lot of actual bottlenecks. Obviously, if we did it ourselves and there was no impediments, we could take over the market. But the problem is, it's not an eBay's advantage. It's not an Amazon's advantage to have all their sellers and all their buyers be one person, right? As a marketplace, they're incentivized to diversify. So we kind of
give them this idea of diversification and allow them to have tons of sellers. Some do retail arbitrage, some do dropship arbitrage, some have a mix of normal sales and dropship. And so we were able to avoid a lot of those bottlenecks. Another really important reason is that our sellers are kind of the growth engine of our products. They always discover these new niches.
They're going to be the first ones to look at products coming from China and new stores whereas, you know, unique inventory. And so we can't do all that product discovery ourselves. And so we just do the stuff that's really scalable, which is the software. Well, why can't you do that discovery yourself? I mean, I assume you've written some script to go after unstructured data on these sites.
You then structured. I imagine that searching is much more efficient. You have a much wider net than an individual seller. Man, you're looking at new stuff coming out of China. the interesting thing is there's a lot of niche opportunities that aren't super, you know, they're not million dollar opportunities each, but they may, they might make somebody a hundred K, 200 K a year.
And so not an R incentive to kind of seek all these out. And there's hundreds of them, right? Thousands maybe. Um, and so we have people from all across the world who are really, you know, some are really familiar with selling in China and creating listings that are well translated and really appeal to those sellers.
And so they're going to win in a certain market, but we can't really go out and win all those hundreds of markets. Interesting. Okay. How do you make money on price yak? So we charge, it's a complicated billing model, but we basically charge per listing and per order. So it's kind of a modified SAS fee.
Okay, so what is, can you break, can you, just for simplification matters, can you break that down? The average person's gonna pay you about what per month on Price Yak? Yeah. So we have probably around a thousand customers on price yak and it's very skewed.
So there's some big customers that pay us tens of thousands of dollars a month and there's a lot of smaller ones that pay us on the order of hundreds of dollars a month. Okay. Yeah. If you're, if you're just the beginning seller and you have a couple hundred items, you'll probably be paying us a hundred, 200 bucks a month, which works out to like 25, 30% of your profit. Yeah. Yeah.
So what, I mean, if I pushed you harder here and do an average, would you say 500, 600 bucks somewhere in that range is probably fair? I think the mean, yeah, it would be around there. Uh, the median seller probably pays a little bit less cause it's like pretty skewed to the, you know, to the top.
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