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How We Started An E-Commerce D2C Company

Rachel Steinford
Rachel Steinford

Joe Stefani is the Co-Founder and President of Desert Cactus, an e-commerce consumer products company on Amazon. Desert Cactus has grown immensely since it was founded in 2012. They are considered as a leading licensee for licensed products on Amazon and is a certified gay owned business. Desert Cactus makes several million in sales per year with massive sales growth.

Was it a lightbulb moment or gradual process of Desert Cactus?  

For us, the idea to start our Amazon store was a lightbulb moment, but we wanted to prove our concept over multiple lines before we really dove head first with investing a significant amount of money in the company and in hiring outside employees.

Did you have any experience/expertise in the area?  

I had a handful of years of experience in the e-commerce world, but the concept we were putting into place (using Amazon as a marketplace for licensed goods) wasn’t yet being done in that way.

Have you raised any money? How much?  

We started our business with a small subgroup of products (five) and we grew very slow at first (from $250k in revenue the first year to $750k the second year). With our first product line, we set a goal for revenue and profit. When we hit those numbers, we added a handful more products, and continued to repeat the process. As of 2021, we’ve raised no outside money at all; in the past, we’ve had businesses with investors, and we’ve had to try what they’ve proposed because of their investment. I think people sometimes raise money for the wrong reasons, but also they get tied up with things that don’t make a difference - such as raising money for flashy things like new offices, personal assistants, etc.

Who is your target demographic?  

Our customers vary across the Amazon platform. Each type of product has a different target demographic.

Amazon products

For instance, we have some product lines that are targeted for six- year-olds to 12-year-olds, and others that are primarily targeted to college students.

What is the funniest/most strange customer request you’ve had?  

We’ve had tons of requests from “customers” to send packages to famous people, such as George Bush, Kim Kardasian, and others... Long story short, the packages never really go to the celebrities.

How did you fund the idea initially? Where did you meet your cofounder/founding team?  

In the very early years, we had a different strategy, and we encountered a large amount of knockoffs from competitors. It was very frustrating, and we had to try and reinvent the wheel sometimes. My husband and I started the business off with an initial $5,000 investment. Over the years, we’ve had to make major capital injections into the business in order to take it to the next level. For the first two and a half  years, we took zero salary in order to make sure 100% of the profits went right back into operating the business. It was just my husband and I, and we were dating at the time.

Any tips for finding first employees?

Everything in finding employees depends on what you’re looking to accomplish. We went to hire our first employee and ended up coming away with two. In our situation, we were looking for a swiss army knife (someone who could do a variety of tasks).  

Did you run any companies prior?  

Years ago, I owned and operated two summer collegiate baseball teams in the Chicago market. Along with three other individuals, I actually was instrumental in founding  that league.

What motivated you to start your own business?

Prior to starting Desert Cactus, I always held the belief that businesses I worked for were run the wrong way, or they took the traditional way of getting from A to Z. I  liked the idea of doing it my own way, but also doing something in an area that was up-and-coming, like e-commerce.

What were your family and friends first thoughts on your company?

When we started, many people thought, “that’s nice,” and I still have friends that think we’re not big time or see this as a hobby of mine, even though we have 27 people who work for us full-time.

What motivates you when things go wrong? What is the end goal?  

Whenever we encounter roadblocks, I remember what drives me: I want to prove others wrong and show them that it can be done.

Do you have any advice for someone just starting out?  

For other entrepreneurs, I would suggest not quitting your full-time gig to jump right into your idea- take your time and prove your concept. I wouldn’t do anything crazy (like quitting your job) until your company can support you and then some. For example, if your salary is $50k a year, and your business is making $50k a year, it doesn’t make financial sense to quit your job. There are a lot of expenses that a normal employee doesn’t see: retirement, health insurance, payroll taxes, etc. All those have to be taken into account when deciding on your risk. I also would recommend not to ask for money from other individuals until you have proven your concept AND you can monetize it. A great idea with no potential to make money is not a business, it’s just a great idea.

What has driven the most sales?

For us, Amazon has been the driving force behind our sales, hands down. We’re an e-commerce direct-to-consumer company, and Amazon has a large market share in that sector.  

What is stopping you being 3x the size you are now?

In 2021, we’re going to almost double the size of our business. What’s holding us back is ourselves, intentionally.

Desert Cactus

We’re trying to grow our business responsibly. What we’re starting to run into is growing your business at 50% is different when you’re at $1 million in revenue versus $5 million in revenue.

How do you protect yourself from competition?

Our business is unique in that we use other’s intellectual property (IP) in order to make products. I once had a very famous person give me some great advice, which was to get a great accountant and a great lawyer. Every month, we have a line item in our budget for accounting and legal services (usually 25% over what I expect to spend in the year) so we can have some one-on-one planning time for unique issues such as competitors stealing our designs.

Desert Cactus products

We work with each rights holder to ensure a beneficial relationship, which allows us to sell official products.

Do you have any trademarks/IP/patents?  

The authenticity helps us stand out from other products on the market. Currently we have two trademarks and a handful of copyrights.

What are the top 3-5 apps your business could not run without? Why are they essential?  

Our business runs every day on Google Sheets/Google Docs, DropBox, and WeTransfer. Because we have so many people spread out throughout the world, we need these programs to connect and collaborate with each other. Since we are primarily creating, submitting, and uploading designs, WeTransfer gives us the ability to send documents with a large amount of data.

What are your favourite books or podcasts?

I’m not into trade publications but do utilize newspapers such as the Wall Street Journal versus books. I’m not a fan of podcasts. I have a bad attention span.

What are the next products you’re working on? Are there any releases you can tell us about?

Currently, we’re working on launching products for a handful of Premier League soccer teams, Gumby, and a bunch of other properties that we’re finishing up the legal paperwork for. Gumby products are releasing over the next few weeks, as well as two teams in the Premier League.

Where do you see the company in 5 years?  

We see our company having exponentially more licensing deals with properties outside of our traditional areas of focus (pro and collegiate sports). Our goal is to triple our sales within the next five years- and I honestly think we can do it. If we continue on our current track, the revenue for Desert Cactus will be $10 million plus here shortly.

Would you ever sell?

We’ve received many offers to sell over the years, but we were focused on growing the company into something that is totally different from other competitors’ business models. If the right offer came along, we’d be interested; however, it would have to give us the ability to fund our next idea, in addition to funding a lot of the charitable interests that we have.

Company Name: Desert Cactus
Founder: Joe Stefani
InterviewEcommerce

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