The 10 Hidden Killers Draining Your Online Store’s Profit — Scott Brandley, DJ Sprague | Why Hidden Leaks Kill Profits, What Costs 38% of Revenue, How to Fix Product Returns, Why SMS Recovers More Carts, How to Stop Processing Fee (#467)

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Claus Lauter (07:36.536)
Hello and welcome to another episode of the Ecommerce Coffee Break Podcast. Did you know that most merchants are quietly bleeding revenue every single day? Not from ads, not from traffic, but from hidden revenue killers. I'm talking about things like chargebacks, false declines, product returns, and a few others most store owners never track. In this episode, we break down 10 hidden revenue killers inside your business and more importantly, how to fix them so you keep more of what you earn and actually grow profit. To do that, I'm joined by Scott Brantley and DJ Sprake.

Scott is the CEO of Shopper Approved and TrustGuard. He's built more than 40 software products over 26 years and he's also keynote speaker, strategist and co-author of the book Reputation King. DJ is the chief marketing officer of Shopper Approved and he's an international bestselling author, keynote speaker and podcaster who has worked with brands like Kodak, Toyota and Hyundai. Scott, DJ, welcome to the show.

Scott Brandley (08:27.781)
Great to be here.

DJ Sprague (08:27.829)
Exciting to be here. Thank you.

Claus Lauter (08:31.638)
Let's dive into it. Scott, what are the biggest revenue killers?

Scott Brandley (08:35.909)
What are the biggest ones? Well, that's interesting. There's actually, like you said, we've discovered 10, but I would say the biggest ones probably have to do with cart abandonment. A lot of people know that cart abandonment is a problem, but they don't realize the scope of how big of a problem it is compared to some of the other leaks that are affecting their businesses. If you look into the data,

Claus Lauter (08:48.259)
Mm-hmm.

Scott Brandley (09:03.127)
If you take 100 visitors that come to your site, statistically, seven will create a cart and then only two of those will buy, which means you have five people that created a cart that just abandoned your site. And so if, and if you do not take those five people very seriously, you're missing out on the hottest leads that you potentially have to make a sale.

Claus Lauter (09:29.422)
Now there's a ton of others and DJ I want to ask you about these. So because you did something that is very unique in the market and we will dive into this a little bit later. because you really surgical dissected every little leak in the business that can cost your money. DJ there is more than just one, there is 10. Just walk me through these 10 before we touch on them.

DJ Sprague (09:54.325)
Yeah, absolutely. So the most obvious one is payment processing. Everybody pays to process their payments and that averages out to be about 3.1%. When you add in your actual percentage rate plus your per transaction rate plus your hidden fees, et cetera, it's about 3.1%. You've got fraud. Fraud is about 3.6 % and that would be obviously fraudulent transactions. Fraud management.

fraud management costs about 3 % of your gross revenue. And that would be your software tools, your staff, et cetera, to manage fraud and manage the purchases internally. You've got chargebacks. Chargebacks is huge. The average chargeback actually costs you about two and a half times the original purchase because you've got to obviously return the money. Then you've got to pay all the fees, et cetera, to the credit card companies to

manually process those chargebacks. You've got false declines. False declines cost about 6.5 % of your potential revenue. And a false decline is when people have a good card and it's the right customer. But for some reason, the antiquated or below par fraud detection services are flagging it as potential fraud. So they decline the purchase. So that's a big one. Returns. This is one of the biggest.

The average e-commerce website spends about 16.9 % of the gross revenue on processing and handling returns. It's huge. So if you're selling physical products, you could be spending, if you're in the wearables industry, fashion, it could be well into the 24 % range. And so it just depends on the product category in which you're in, but 16.9%.

of your top line revenue on average goes to returns. Lost, stolen, damaged products. That's about 3.3 % of your gross revenue. Security concerns. About 25 % of your customers do not check out or even create a cart because of initial security concerns about your website. Today, people are hypersensitive about stolen identities, stolen credit cards, etc. So if they don't feel

DJ Sprague (12:15.317)
that your website is secure or they don't see the obvious security seals, they bounce. And this is one of the reasons you have such a high bounce rate and a low conversion rate. Site abandonment, of course, is huge. As Scott said, only 7 % of your visitors create a cart, 5 % actually abandon that cart, 3 % on average convert. So what happened to the other 93%, huge opportunity costs there. So those are some of the things we dissect in our book, Cash Flow.

And we really break it down. have all the citations, all the research, primary and secondary research. We spent about a year researching these 10 revenue killers to determine where the average e-commerce website was bleeding revenue. And this is the list.

Claus Lauter (13:04.162)
Yeah, I had to read the book already and for me it was a complete eye opener because all these topics that you mentioned there are well known as a topic to a merchant, but they usually take them as they are and they don't know how much room for improvement is there. DJ just mentioned all of them. Give me an overview what the overall loss for a business is when it comes to cost of putting all this together.

Scott Brandley (13:31.853)
Yeah. So, I mean, it depends on the business, right? But if, if you're not paying attention and you're just kind of going through and doing the, doing the thing, you can lose up to 37.9 % of the potential revenue that you could be making if you just paid attention to these, just these 10 revenue leaks. And so what we did, like DJ said, we took a year.

we did a deep dive to see just how deep these different rabbit holes go. And then we, you know, we tried to find solutions that the average e-commerce site could actually use or leverage in order to offset these losses. in some of the, some of the situations, we actually found solutions that were, it actually turned that loss into a gain, a financial gain. So,

There are options to solve these problems. A lot of them are innovative. Some of them are pretty straightforward, but when you combine all of these solutions together, you actually come out quite a bit ahead of where the typical e-commerce website is.

DJ Sprague (14:49.493)
Yeah, we figured that conservatively, Klaus, if you took these 15 different opportunities, because there's five revenue accelerators and then there's 10 revenue killers, collectively 15, and we have a tool to address all 15, the top line revenue accelerators and the bottom line revenue killers. If you just took a very, very conservative 1 % gain from each of these tools and strategies, that adds up to 15%.

So when you take that 15%, that is a very significant change in your overall bottom line profitability.

Claus Lauter (15:31.16)
Makes perfect sense. as we can see from your caps, we're talking about cash flow. So that's not only the name of the book, that's not only the name of the tool, but it's also what we're talking about. And cash flow, most businesses out there are really stressed when it comes to cash flow. Most e-commerce business are cash flow driven and with rising ad cost, meta, Google getting more more expensive, margins are getting smaller and smaller.

Maybe as an example for our listeners, can we dive into one of these revenue killers and go a little bit deeper? pick one. What's the quick tip, the golden nugget?

DJ Sprague (16:04.435)
Yeah, let's look at product returns because product returns again, 16.9 % on average. It's a huge one. In fact, we have a client on cashflow right now and his is 18 % average return rate and it's killing them. so if you look at the ways that you can reduce returns, we've outlined many in the book. Let's just start with the proactive side. One is product reviews.

If you have good product reviews and people understand the nuances of the product, the chances of them returning or being dissatisfied or unhappy are much lower because they know more about the product from the user side. Second would be Q &A, product Q &A, questions and answers about the product, specifics, fit, finish, dimensions, materials, how it actually works in a real life scenario, et cetera. That's another proactive way to reduce

returns. Now on the reactive side, when they actually get the product, we have a tool within the cashflow suite. We call it the cashflow stack, which is the 15 different tools that reduce expenses, increase revenue. We have a protocol label that will actually allow the customer to return the product, but get store credit instead.

and it'll incentivize them to say, for example, you're going to return this $100 product. We're to give you $110 in store credit if you exchange versus a flat out return. What does that do? That allows you to keep the revenue and get an additional sale. Right. So now you've got two sales instead of zero. That's just one example. The other thing it can do is it'll track.

the returns for you. It handles everything. It's a whole portal. It's white labeled for the brand. So you don't have to spend your time, energy, resources, people, et cetera, to manage those returns. It's all done within the label portal. It's all white labeled to your brand. So it's completely hands off for you. You don't have to spend any resources handling it, managing it, creating the labels, et cetera, tracking, sending the notifications to the customer, you know, that kind of a thing. All the status updates are automatically handled.

DJ Sprague (18:29.043)
buy label at no cost. It also handles all of the lost, stolen and damaged products. So you've been in e-commerce, how many calls, emails, inquiries you get for support, where's my product, where's my package, where's my shipment, right? So that's all handled, all the updates, all the notifications are handled within the customer portal. You don't have to deal with any of that. Now, if it doesn't show up or it arrives damaged or it's stolen by a porch priate,

Pirate, that's all handled within the portal as well. You don't have to handle anything. So let's just say, for example, a product arrives damaged or broken or doesn't arrive at all. Label will actually make another purchase for that product on your behalf at full price. It'll take the other product back. It'll handle all that and create a new purchase for you. So now you're getting two purchases instead of zero. So you're actually doubling your revenue.

And this is all handled, again, white label through the portal. So you don't have to do anything. Those are just some of the nuances of how you're to increase your revenue while also decreasing your expenses. That's what Scott was referring to earlier, is a lot of these tools not only decrease your costs, your expenses, hard and soft costs, but they also increase your top line revenue. Because if you can take a lost, or damaged product that you would have taken a financial hit on.

and turn that into two full price purchases without handling any of the customer support expenses. You just made money, right? So does that help explain some of the ways that these tools can...

Claus Lauter (20:08.428)
I think it makes perfect sense. I think most of our listeners are selling online. They know about the problems about returns. And as I mentioned before, there are certain industries like the fashion industry, the apparel industry, where returns are extremely high and they will be happy for any dollar that they can get in and save there. Scott, now we have like a tool level. We have the book and we have the tool, which I think is great because you can start with the book and see what applies to you. And then you can basically upgrade and do the tool.

to work for you. Let's talk about the book first. How long is the book? When is the book coming out? What can I expect?

Scott Brandley (20:48.633)
Yeah, so that the book is available on Amazon so you can go and search for cash flow. We just barely launched it. So that's really exciting. It's been, you know, a labor of love. If you have ever printed printed something, then you know how much time and effort goes into it. So that's available. But like you said, the book is very educational and you don't actually even have to use cash flow in order to benefit from.

the information in the book. laid it out. We laid everything out, all the strategies behind every tool, why we recommend them, what they do to help you, how they either save you money, make you money or both. And that's just for education purposes, right? So the book is, it's about 200 pages. It takes about three hours to read, but it is jam packed.

Claus Lauter (21:45.326)
True, yeah.

Scott Brandley (21:47.255)
with information. There's no fluff. It's just all everything that you can do strategically to plug these holes. And then like DJ said, there's also five tools that accelerate your growth. And we talk about those in there too.

DJ Sprague (22:02.783)
And you get the book for free. Your listeners can get the audio and digital book for free at cashflowpay.com. So again, cashflowpay.com, they can download the free audio and digital book. They also get the calculator that allows them to actually calculate for themselves how each of these tools or each of these revenue leaks and revenue gains can impact their business. They just plug in their data and it'll show them exactly how much of an impact each of these strategies or tools are going to affect their bottom line.

I'm actually showing the book, Scott. You also get a copy of our cash flow or our reputation King's book. When you get your free cash flow book at cashflowpay.com, you get both books for free.

Claus Lauter (22:45.656)
I had the honor, as I said before, to already read Cash Flow and it was a complete eye-opener. Many, many things there that apply to not only e-commerce business, pretty much to every business that is doing online in one way or another. And there were a couple of things that I immediately went into to find out on how I can optimize my business there. So for our listeners, the book is for free. Go download the book. It's a really good start. I think it's the one book out there that really...

compresses all this information together in one book and you will have instantly a revenue skip in your business if you use these strategies and these eye-opening information in there to apply to your business. Now let's do the second step. Talk about the tool. This goes far further than only the book. How do you help your customers with their cash flow?

DJ Sprague (23:39.668)
Thank you. So the tool is really a suite. We call it the cashflow stack. It's a stack of products we put together. Some are owned by us, which would be shopper approved, which is your product reviews, your store ratings, your video reviews, your product Q and A, your website security. And then others handle all of your false declines, your fraud, your shipping.

processing and your notifications, returns, et cetera. And your card abandonment. We've got a couple of really cutting edge card abandonment tools in the suite that work synergistically. One tool works in the traditional email process and it helps with capturing emails and contacts as soon as they come to your website and then throughout the buyer journey on the website.

They can be time-based pops, can be page-based pops, can be exit pops, entry pops, et cetera, to make sure that they're maximizing the number of leads they generate, as well as a save my cart tool, which is really innovative. And way that works is when people go to a product page and they generate a cart, if they're going to do an exit, it'll say, would you like to save your cart for future use?

Absolutely. And then they can print their email address and then they'll email that cart to them so that it's very easy to A, be reminded, B, look at what's in their cart and C, check out. So the Save My Cart is a great way to increase your cart abandonment recovery. And then the other tool is an SMS play. And that actually uses a human being to reach out by text and say, Hey, Klaus.

I notice you banned your cart. Is there a question you have or anything I can do to help you understand how this product works, et cetera? And there's literally a human to human conversation. It's not AI, it's person to person. And that person to person dialogue is actually so refreshing today because people are so used to AI chat box, et cetera. When they actually have a human being, it's like, wow, this is really cool. So they can have a conversation. And so...

DJ Sprague (25:59.605)
The SMS tool works in combination with the text tool and they actually help each other. They don't conflict, they layer and collectively they create about a 25 % cart recovery rate, which is unheard of in the industry. So that's a really powerful combination that we have within the cart, the cashflow stack. Now, how does the cashflow stack work? Well, the whole thing is free. It's free because we offer a payment processing

service. The payment processing service takes a percentage of that payment processing fee and literally subsidizes all of these software tools. So what that means is instead of paying for these 15 different tools, which would cost you thousands of dollars a month in subscription fees, set up fees, et cetera, minimums and seat fees, and you know how it goes, right? So all the tools are free because they're paid for through the cashflow payment processing side.

And what that does is it literally eliminates your processing cost to zero. Now, if you talk to a payment processor, they're going to try to get you to switch to their service based on, well, going to charge you 2.9 or 2.7 or 2.5 or whatever the case may be. Ours is zero. Why? Because we're offsetting the entire thing through the revenue gains and savings that you realize through the different tools. And then of course, all the rest is additive.

So if you take a 15 % gain and then you pay for the 3 % processing fee, you're still 12 % ahead. Again, that's a very conservative number. We've got tools that are generating, you know, obviously a lot more revenue than that in both savings and that new top line revenue. But we try to be very conservative so that we don't, you know, get, get people thinking this is, this is way too much. But the reality is, you know, you can see a double digit increase.

in conversion rate and alone through these tools. So that's how it works. All the tools are free, completely subsidized through the payment processing portion. And it's just, it's all net revenue. Now think about this. We're so confident, and I don't want to sound like a pitch, but we're so confident that we will offset that credit card fee to zero, that we actually give a $5,000 guarantee.

DJ Sprague (28:25.173)
If after a year of using Cashflow, don't have a 0 % card fee, we give you $5,000.

Claus Lauter (28:32.8)
Okay, there's so many things in there that I want to unpack. So first of all, you can't be beat free. But on the other hand is you said payment processor and that rings a bell with me because a lot of merchants out there having problems finding a good payment processor, a payment processor understands their business and who is also affordable. Because as you said, most of them are charging you a arm and a leg just to get the payment processed. And what you do is you're specialized, you don't charge anything there.

and you bring the whole suite of tools for free onboard. So literally you can't beat this. Scott, talk me through the onboarding process. How does that work?

Scott Brandley (29:11.033)
Yeah. So obviously we're, we're dealing with 15 different tools, right? So one of the things that makes this work is because we own shopper approved and we've been in the software industry since, I mean, the beginning of time, feels like sometimes a, but back since back in 2006 is when we launched our first software product. We have an amazing onboarding team and an integration team.

And they're all in-house right here in Utah. And so we just, know how to help our clients to integrate and onboard with these tools. And so you come in, you get concierge service. We help you set it all up. And then you work with our team to get these tools integrated into your site. And then you're off to the races.

So and but that's but that's only the beginning. The other cool part class is we have a mastermind community inside of cash flow because we don't just want to put put in some tools and then walk away. We want to be in it with you. We look at this as we are strategic partners and if you haven't been able to tell just from our conversation so far there is a lot of strategy in everything we do.

And so we want to teach you that we want to have everyone that comes in, be part of that community because everyone that comes in knows something and they're experts in something. So when we come together, we get to lift all ships. And that's just, that's a whole nother part of cashflow. It's just so exciting, but we don't even really talk about it, but that's, that's just another really cool thing because we've come together and we just help each other to succeed.

DJ Sprague (31:05.769)
Yeah, for example, in that scenario, one of our clients in our community, our cashflow, we call it the cashflow club. It's our cashflow community. We showed him ways to reduce his Google ad spend by thousands of dollars a month, literally thousands by pointing out some inefficiencies that he had. We showed him ways to reduce returns through proper sizing processes.

how to make more money through white labeling. We've just layered on all kinds of, they're not even in the book. These are just things that Scott and I have learned over the decades of being in the space and being marketers for many, many decades. And we're showing our clients how to make more money that aren't in either of the two books, Reputation King or Cashflow, but just good strategies, how to maximize lifetime value.

upsell, cross-sell, how to increase conversion rates on your product detail pages, how to create engagement on your homepage, all kinds of tricks and strategies using behavioral science techniques. Scott and I are both certified in behavioral design, behavioral science. And so we use those techniques to create engagement, trust, credibility, and conversions.

Claus Lauter (32:28.002)
Makes perfect sense. when it comes to expertise, mean, shopper approved is there, it's huge. I think all three of us together have about 80 years of experience. And if you now throw in a community, then we're talking about hundreds and thousands of experience, business experience that can be shared. Now, I want to know a little bit about how people can approach you, how can they get started? DJ, you mentioned the link for the book. Please repeat this again so that people can reach out to you.

DJ Sprague (32:37.013)
You

DJ Sprague (32:58.165)
Yeah, cashflow pay cashflow pay without a W. So it's C a C a s h f l o pay.com. And from there you can watch an introductory video. And then after that you watch a full demo video. It's about an hour and 15 minutes. And then you fill out a form and you get the cashflow kit. The cashflow kit includes the digital book, the audio book, the reputation king book, the full Q and a and

all of the individual product demo videos within the suite. So you can watch about 12 different videos on the demos of each product. And you also get an executive briefing. It's a complete kit of everything, all the resources, all the tools and the calculator. So you can go in there and literally figure out using your own data, how much money you're wasting and how much money you can make.

DJ Sprague (34:00.208)
using the strategies and tools in the book.

Claus Lauter (34:03.661)
Mm-hmm.

Scott Brandley (34:03.909)
And then once you've done all that and you've put in whatever effort you need to in order to make sure that this is a good fit, then you simply book a calendar appointment with me and DJ. We actually talk to you personally because we want to make sure you're a good fit for us so that we can actually...

do this together. Like we said, we want to be involved, actively involved in every business that comes into cashflow. This is a special thing. This isn't just a commodity because we want to do something big and we feel that this is an incredible opportunity for anyone that sees it. And we want to be part of that with them. It's, and so we actually talked to you personally, we have a one-on-one

And then at that point, if all of us decide that it's a good decision, we move forward.

DJ Sprague (34:59.391)
Yeah. Cause we want people in our community that are going to be good people, know, contributing people and we really want to help them. And it becomes a family. It's not just, we're not just a SaaS product. We're not just a plugin. We literally are creating a family here and we're creating an opportunity where once a week each member can, you know, get together in our community and we'll do site reviews together. We'll do strategies together. We'll do best practice together. We'll break down a website and say, okay.

How can we improve conversion rate here? What's happening here? Where are the friction points? What is ambiguous about this page that we can clarify so that the user knows exactly what to do and the value proposition of this company, this brand, this product? We really dig into the behavioral science behind our clients' websites to help them optimize conversion because that's where the lowest hanging fruit is. As you know, Klaus, if you can improve your conversion rate by...

Claus Lauter (35:53.88)
Mm-hmm.

DJ Sprague (35:58.325)
10%, 20%, 50%, 100%, 200%, which we've done, then you're deep in the money, right? It's all about the conversion rate. Then you can layer in traffic. But if you're just adding traffic on top of a site that has a low conversion rate, that's expensive. You've got to increase your conversion rate first. So we address the behavioral science and all those friction points that unfortunately most designers and owners don't see on their own site because they're not trained in the behavioral science techniques.

So we gave that fresh perspective from the outside using those 35 behavioral science principles applied to the website to make sure that we're reducing friction, maximizing trust and maximizing conversion and therefore revenue.

Claus Lauter (36:42.772)
For our listeners, already hear there is so much value in there. Reach out to Scott and DJ, go to the website, use the calculator. I'm sure that you will be surprised how much money you'll find in your business that is just sitting there. Scott, DJ, before we come to the end of our podcast today, is there anything you want to share with our listeners that we haven't covered yet?

DJ Sprague (37:03.861)
There's a lot of revenue being wasted. And as we talked about before the call Klaus with the ever increasing costs of traffic through Meta and Google, and of course the lower organic traffic because of AI search results, websites are getting squeezed and not to mention tariffs and all the other costs of business that are increasing. So websites margins are getting squeezed. And that's why Scott and I created cashflow because we, we saw how

websites were making less and less net profit at end of the day because of these escalating costs. So we made it our mission, our passion, our vision, our goal to uncover what's going on here. How can we help and how can we do it at no cost? Because anybody can charge you bunch of money for software, coaching, consulting, et cetera. But we wanted to find a way to do it at no cost so that everything you're adding to your bottom line, you keep.

It doesn't have to go to pay for another product, another service, et cetera. Everything's free, including the community. And we're just thrilled that we're able to find a way to make that math work.

Claus Lauter (38:15.128)
Cool. Scott, final words from your side.

Scott Brandley (38:19.759)
That was pretty good. Yeah. I, this, like you said, close we together, we probably have 80 years of experience online. DJ and I, we've been doing this forever. We have so much experience and we feel like this is the time for us to be able to share that with business owners that may be struggling or just need a hand up. And so we're here and ready to help.

Claus Lauter (38:50.478)
Perfect. That's the perfect finish to our episode today. Scott Bradley, Scott DJ, I hope a lot of people will reach out to you. I think you have a tremendous, absolute stunning package out there. People can get so much out of it and I hope a lot of people will just get in contact with you and get started with Cache Low. Thanks so much for your time today.

Scott Brandley (39:12.601)
Thanks, Klaus.

DJ Sprague (39:13.365)
Thanks, class. Appreciate it.