How We Started A $70K/Month Business Selling Bongs And Pipes Online
Hello! Who are you and what business did you start?
Hello, my name is Nassir Silwany, and I am the Co-Founder of CaliConnected, an online marketplace for smoking accessories. After years of experience in the retail industry, my business partner and I decided to launch CaliConnected in April 2018.
It has since grown into a full-fledged online headshop marketplace with a wide selection of products and an easy-to-use interface. CaliConnected.com has become one of the go-to destinations for smokers looking for quality smoking accessories online. The website offers competitive prices on a wide range of products, from bongs and pipes to dab rigs and vape pens.
The marketplace holds over $40,000,000.00 of in-stock inventory to the end consumer between our warehouse and vendors we have connected to sell on CaliConnected.com. We have done nearly 2 million in lifetime sales, currently averaging $70K/month.
What's your backstory and how did you come up with the idea?
CaliConnected is the first company my business partner, and I have ever launched. After winning a business case competition that Target hosted at my college, I successfully interviewed for and received a management position for the retailer straight out of college. After a year on the management team at a location grossing north of $30 million yearly, I left to oversee a $13 million retail territory for the largest plumbing company in America.
Shortly after getting there, I knew I needed to embark on some side hustle. Although I was fully committed and enjoying my new job, I just felt deep down that corporate America was not for me. A good friend of mine (who ended up being my business partner) from college and I decided to register an LLC. We put ten thousand dollars in a business bank account and started to go to real estate foreclosure auctions in the hopes of winning something cheap that we could flip for a profit. This was something we aspired to do after college but we didn't have enough capital to compete with the other bidders. After nothing came of that, we decided to look into either the vending industry or e-commerce. We focused on sectors that really hadn’t been revolutionized by either vending or e-commerce.
The best idea that we came up with at the time was to transform the sunscreen industry by combining it with vending machines. Why aren’t their sunscreen dispensers up and down all beaches? Mainly on public beaches that can generate extra revenue for cities and keep their visitors safe in case they forget their sunscreen. Even further, it could start an eco-revolution, where we dump the idea of buying sunscreen in environmentally harmful bottles and transition to a world where sunscreen is stocked for you at the beach.
Going down the rabbit hole of this idea and even meeting with the holder of a utility patent that covered basically any sort of sunscreen dispenser, we quickly found out why this hadn’t happened yet and why we surely were not going to be able to make any headway with this idea. There were basically two people who had started to pursue this idea in the private space with a direct agreement with hotel chains, and the one did not have a patent or a licensing agreement from the patent holder we spoke to. This turned into a considerable patent infringement case between the two, and you can guess the rest.
We went back to the drawing board but this time focusing on e-commerce. Our next best idea was to successfully launch the best online headshop. Why did we target the cannabis equipment industry? Because massive retailers like Amazon have already conquered the online shopping market but there are certain industries that they have not touched. It's highly unlikely these large retail giants will ever become competitors because the particularly fragile nature of our products would slow down the efficiency of their warehouses. It also didn't hurt that we were both well-versed in the cannabis industry and already familiar with shopping from the websites that are now our competitors.
At the time, we knew from experience that a majority of the options available to shop for Bongs, Dab Rigs & Vapes online still felt untrustworthy, and they lacked customer support making the shopping experience poor. Even when looking at the brick-and-mortar experience in this industry, some of the flaws seen in the e-commerce space were not seen here, but it was rare to find a full-on marketplace experience where you could get a hold of almost any product you wanted. The majority of head shops out there are small mom-and-pop businesses with limited inventory and reach.
We decided to check out the Shopify Exchange platform, where you can find business owners reselling their starter stores. We came across a tiny online head shop that was based out of the UK. They had maybe five total products listed that were up for sale. After doing some research, it was evident that if we wanted to pursue buying this store, all we were purchasing was the name and URL essentially. He had no inventory we wanted, and the current logo and branding he had tied to it were terrible. We loved the name for the type of customers we would be targeting and felt that it would resonate well with the industry, so we decided to take a shot at buying the store.
The current owner then had it for sale for $300.00 on the exchange platform. We felt it was worth that much for the URL alone but decided to negotiate it down anyway, and we ended up paying a whopping $130 for CaliConnected.
With this industry being so regulated and banks not wanting to work with us as they do with other businesses, running the company as lean as possible is vital.
Take us through the process of designing, prototyping, and manufacturing your first product.
After buying the name we did a complete rebranding. From the color scheme to the logo, everything was redone. We filed trademarks with the United States Patent Office in order to protect the branding. We bootstrapped everything at first and developed the website on Shopify.
We got some inventory under us and reached out to one of the larger online head shops to see if they would allow us to drop ship some of their products. This allowed us to significantly increase our product offering to the end consumer from the little inventory we could purchase at first. Luckily they said yes and were reliable. However, we knew if we wanted to be able to offer the best customer service, and the best overall shopping experience, we needed to save for our own warehouse and be shipping all, or at least a majority, of the orders ourselves.
With being in a high-risk industry, we initially ran into some issues with finding a payment processor at rates that wouldn’t cut majorly into our bottom line. There are definitely multiple options when it comes to processing for high-risk merchants, but at first, it is costly. We also wanted to run everything above standards regarding the laws we needed to abide by. At the time, there were only two states that required age verification by a 3rd party vendor, not allowing the retailer or customer themselves to self-verify. We saw the writing on the wall and decided to start using a 3rd party age verification system nationwide from day one. A costly decision, but it was just something we saw as vital for ethical and branding reasons.
Describe the process of launching the business.
Once the website was built on Shopify and we locked down both our payment processor and 3rd party age verification provider, we were good to go live. We reinvested all profits to invest in a warehouse and began accruing as much inventory as possible.
We quickly did everything possible to become self-taught SEO experts as well. Our industry is restricted from running social and search ads so search engine rankings are paramount for bringing in organic traffic. Within four years of existence, we have grown the website to have the 4th highest Domain Authority in the industry. This has set us up well to gain substantial growth over the next few years.
Although you’re on a really tight budget, at times, the cheapest option isn’t the best option.
Since launch, what has worked to attract and retain customers?
When it comes to our industry, the only thing that works is to do as well as you can with SEO. We don’t have the luxury of other sectors to be able to run search and social ads. There are some platforms to run the display and pay-per-click ads within the industry, but we found that they did not convert that well. Luckily for us, my business partner Mike studied journalism/professional writing in college and even took a class that was dedicated to SEO, so we felt we already had a leg up considering we started the business years after some of our biggest competitors.
Some platforms to help you improve your SEO are Moz, Diib & SEMRush. We have found that they all work well, and it all comes down to personal preference and budget regarding the best option for your business.
When it comes to how to bring existing customers back, we do the usual tactics when it comes to email. We also go above and beyond with every first-time customer and send out a “handwritten" thank you card with a $5 gift card in the mail. Why we say, "handwritten” is because we have grown to the point that we couldn't keep up anymore and invested in two robots that write our thank you cards. These are not printers. They actually hold a pen and write out our notes for us. This is a tactic we took from the early days of Zappos.com.
Our staff used to spend the last hour of the day handwriting notes for our first-time customers before we brought on our robots. There are also services out there that would do this for you. They link directly to your Shopify store, and the cards are automated to go out at your schedule, and within the triggers you set.
How are you doing today and what does the future look like?
Current gross margins are 31%. With only manufacturing a few in-house brands and reselling 98% of what we sell, we see this as a great number. Currently, 96% of our sales come directly through our online stores. We make minimal sales on eBay and Etsy, which amount to the remaining 4% of our total sales.
In our industry, there is minimal inventory we could list on these ancillary sales channels. One of the products we are able to list is our Blue Fiesta Stash Scrunchies, which we actually partnered with the manufacturers at Blue Fiesta to have them create our very own prints for our site that are not available anywhere else.
When it comes to inventory, with our partnership with DuoPlane, we have expanded our inventory to over $40 million in active inventory and over 25 vendors on the platform. This partnership has allowed us to offer exponentially more merchandise than solely what is available at our warehouse.
We currently do not spend on ads and instead heavily focus on SEO and affiliate marketing. This keeps our customer acquisition costs relatively low compared to other industries. When it comes to our affiliate program, we run it in-house through the 3rd party app Affiliatly. Most of our affiliates are coupon or review sites focused on our industry.
Through starting the business, have you learned anything particularly helpful or advantageous?
I think the number one thing we learned looking back at the beginning of starting the business is that although you’re on a really tight budget, at times, the cheapest option isn’t the best option. It’s hard to try and wrap your head around a number or monetize your time at first, but if there is anything that makes you more efficient, that should be your first determining factor. Your time will only become more important and spread very thin across various tasks.
A good example of this was when we were trying to determine the best CRM system to use for our site. This was during our first full year of business, where we only did $109,000.00 in sales. We could have easily kept running on having support issues stream in on each separate channel like email, phone, chat, text, and social media accounts. We knew if we continued to grow, not having a centralized CRM system would only make us less efficient and potentially cause customer service issues.
We ended up choosing Gorgias because, as opposed to solutions like Zendesk, Gorgias has an extremely powerful integration with Shopify and Shopify Plus, so that you can see order details for a customer, and refund, cancel, or duplicate orders without leaving the help desk app. There were tons of other solutions out there that were much cheaper, but we felt that Gorgias would make us the most efficient and allow us to grow with their built-in automation.
What platform/tools do you use for your business?
- E-Commerce Platform: Shopify
- Shipping Tools: Shipstation
- Fulfilment: DuoPlane
- CRM: Gorgias
- Email: Seguno
- Age Verification: Age Checker
- Taxes: TaxJar
- Reviews: Stamped
What have been the most influential books, podcasts, or other resources?
I think the most influential book in my entrepreneurial career would be Profit First by Mike Michalowicz. This book puts it as simply as possible how to run a lean start-up and not run a “Cash-Eating Monster," as he puts it. Even if expenses have gotten away from you, he gives great tactics on how to real them in.
With this industry being so regulated and banks not wanting to work with us as they do with other businesses, running the company as lean as possible is vital. Even in an industry where banking opportunities exist, you still want to run your start-up as lean as possible to get to profitability as soon as possible.
Our staff used to spend the last hour of the day handwriting notes for our first-time customers.
Advice for other entrepreneurs who want to get started or are just starting out?
I think it’s the most cliche thing, but I would say never to give up and be ready to pivot. There will be plenty of days when things do not go right, and you will not know the answer to whatever you are working on. This is okay, and you will learn to work through those issues.
The other thing I would say is if times are well and you are growing exponentially, I would not expect that to last forever. Prepare the business to survive in case there is a 30%-50% reduction in revenue for a temporary period.
Where can we go to learn more?
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Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
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