How to Make Money from Selling Merchandise on YouTube: TubeTalk 172 with Dave Higashi

Did you know? Selling merch can be even more lucrative for a YouTuber than a brand deal? Find out more on this week's episode of TubeTalk.

Let's talk about merchandise and the opportunities around it for YouTube creators. And not just the big YouTubers, even smaller channels can offer merch to their subscribers.

But what kind of products should you be selling? Do all products work or do some work better than others? Which merchandising platform should you use? Are they all created equally or do some offer better products and services? These are your merchandise questions. We have merchandise answers on today's episode of TubeTalk.

Our guest on this episode is someone who is going to help us navigate through these treacherous waters. Davin “Dave” Higashi is the Co-Founder and CEO of Crowdmade, a premier merchandise service company for YouTube creators. Previous to founding Crowdmade, Dave grew his career in e-commerce at eBay as a corporate finance professional working across multiple business units including eBay, Paypal, and Stubhub. In this episode you will learn:

  • Why building engagement and a community is the key to merch success
  • How to get started selling the kind of merch that sells
  • How to avoid expensive merch design & production mistakes

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How to Make Money from Selling Merchandise on YouTube: The Full Transcript

Liron Segev: Dave, welcome to TubeTalk. Okay, so since you've teased us a little bit, and I've also teased everybody a little bit, can you tell us who are some of your creators that you work with?

Davin Higashi: Oh, sure, we have a lot. Some of my favorite ones are Jackfilms, it seems like many people know who he is. Simply Nailogical. In recent days we've been working with a lot of top tier animators like GingerPale and Tabbes and Emirichu. Just amazing names, and we're so lucky to work with them.

LS: So let's start kind of right at the top. There's a reason that a lot of these top tier creators have literally millions of subscribers in some cases, and yet, they're still turning around and saying, hey, I want to do this merch thing. Why are creators turning to merch?

DH: They have different reasons at different stages of their careers. In earlier stages, a lot of them are trying to establish their brand. And merchandise is just an incredible way to connect with fans in a more physical fashion. Later in their career as they get larger, so it can be a significant source of income for some of them. And this is what Crowdmade is about. Is about making sure that we work with them at all stages to identify what their goals are, and do our best to help them get there.

LS: So it's goal orientated, but there isn't a magic number, there isn't when I hit a certain number of subscribers, I must do this merch thing. Some people never do it. Some people do it much smaller. Is there a way for us to kind of look at our own channels? Is there any signals that we would look at to say, okay, the time has come to take that step?

DH: Great question. Obviously we have limited resources, so we're not able to work with every single YouTube creator there is, but we do our best. So we tend to look for three major signals. The first being size, if you're not of a certain size, it's really tough to make meaningful amounts of sales. And again, it depends on your goals. But for it to be a meaningful number, normally around 100,000 subscribers is about the place where merch is more meaningful, it doesn't mean it's not useful for the business, but it is more meaningful. The second thing we look for is engagement. Engagement is a really clear indicator of how deeply the fans care about that channel, or how well that creator has been at activating their audience to do things, which is just a wonderful way of looking at things. So they might not have the most views or the most subscribers, but they have just an incredible level of engagement as a percentage of their views. That's a really important metric.

And then the last one that I think is discounted by not just the creators, but also the industry players out there at merchandise, is how good is that creator promoting. And this is the wild card. If they are a huge, huge creator, and we've worked with some in the double digit millions who have had trouble selling significant or meaningful numbers of units. Because the promotion wasn't good. And we've had very small creators who just absolutely astounded us, because their promotion is incredible. And thus, it's the wild card, and we are always trying to decide when we're working with the creator, can we help them improve their promotion, because that will help at every stage of their career. So for us, the big three are size, engagement, and promotion.

LS: Okay, I'm trying so hard not to make a size doesn't count joke. It's just so difficult. But I'm resisting. But at the end of the day, what you're saying is true, it's that you could have a million subscribers, but there's no community feel, people are there just for the content, but they aren't really connecting with you. That's going to perform very differently to maybe a much, much smaller channel, maybe even at 50,000 who have got such a great audience. And they hang on to every word, they comment, and they reply, and they have entire conversations with the creator. That's going to way outperform someone who's ... Well it's just another revenue stream. I'm not even going to bother to do anything about that.

Okay, so now let's put ourselves into this mindset. I've got my channel, I've got a community, I'm starting to get some traction, they're loving kind of what I'm doing, I want to give back to the community. Where do I start to kind of thinking along the merchandising game? Do I start with something small, like a coffee mug? Or is there a limit? Maybe when somebody approaches you, and they say, "Hey, I'd really like to work with you." Where do you start?

DH: The answer to that would really depend on where they're looking for and what they're hoping to do. So with some of the other players in the industry, like the self-serve platforms, like Teespring, it's probably a really good example. They're really good at what they do, if we're honest. And they can print shirts, they can do a handful of things. And there are some creators out there who prefer to try things on their own and test things. And it's not a bad place to do it.

But the thing I always tell creators, the first thing when I have my first call with them is that it's really, really, really easy to do bad merch. There's just so many things that can go wrong. So when they are first getting started with us, we have to make a call and decide, okay, based on what we know about your channel, and your goals and what you're trying to do, what is the scope of recent ability of what we can do because Crowdmade can make almost anything. There are no limitations on what we can make. We've made some very strange things in the past year.

So we need to decide what is the best approach. And so depending on the stage of their career, do they have experience with merchandise? Let's say they don't. And they're just starting out, we are just kind of eclipsing at 40,000 sub-range and okay, it might make a lot of sense to do some merchandise now. Tell me what you're trying to accomplish. That is actually the first goal. And if it is branding, then the way to approach it is, do I have design, or do I not have design and how do I work through that? And working with Crowdmade if you don't have design that is something we work on with you. We have a lot of design experts. And we found that, that's kind of the primary bottleneck for our creators, is the design. And having great design, because just because you have a good design doesn't mean it translates well to a print on a shirt.

LS: Oh well, that's very, very important. I think we got to reemphasize that point. Just because you got a cool design doesn't mean it's wearable on a shirt. Okay, so I've got this really funky logo, I think it's awesome, people tell me they love it, do some things just simply not translate well to a shirt.

DH: Yes. And there are actually two dimensions to that translation to a shirt. One is the wearability, which we have done this for a long time. And we have a good feel for the YouTube audience. But the other is actual printability. There are a lot of providers out there who will take any piece of art that you give them, and they will print it, but most of them do not sample it. And even though most of us use essentially the same technologies, knowing how to adjust the piece of art so that the hot pink that you put in, that neon glowing sign, actually prints because the answer is it doesn't, is what we do as well to make sure that we can maintain very high quality standards. Because the worst thing that could happen is that a creator puts something that they're really happy about and what the fan actually gets is very different, and they're disappointed by that. That is a complete mess on all parts, and we make sure that we never do something like that.

LS: Okay, because at the end of the day, the fans could be young, they could be saving their pocket money, they could be a Christmas gift that they've been kind of dying to get. And this thing arrives in the mail, they're so excited. And then it goes south very, very quickly, whether it's bad print, bad quality, too long, too short, just they're disappointed and nothing is worse for a creator than to disappoint their fans.

DH: Yes, absolutely. And so we take it really seriously.

LS: Okay, so I have a design, I have an idea, do I work with your designers to kind of bring it out to life? Or do I have to supply you with exactly what I'm looking for, and you'll kind of say, yes, this will work or not?

DH: It can be one of either of those. Again we're not a self-serve platform, we are working with the creators to find out. Some of them are more particular, and they have very capable design skills. It's not common, but we do have, especially in the animation community, have some incredible designers.

LS: Absolutely, that's what they do.

DH: That's what they do, and our job at that point in time is to, okay, let's see what we can translate this into. Because if I look into your audience, maybe people look to you because of the detail quality of your art, in which case, maybe it's best for us to go towards something like a notebook or a poster, right? And how do we translate that art that you've given me into a product like that? Or let's say you want to make a plushie, which is something we also have done. How do we turn that piece of what they have into that? So that's one side. And then the other side is, I just have an idea, in which case you'll work with us and then we try to do our best to translate those ideas into really incredible art that we know is going to print or be manufactured really well.

LS: And do you find that people are more of the former or the latter. In other words, people come and say, "Hey, this is what I want." Or do more people come to you and say, "Look, I think I kind of want this kind of thing. It's going to have blue with spikes and things, make it work."

DH: I would say the latter because the type of clientele who really get the most value out of working with Crowdmade care about working with a person who's going to help them. And that's what we're about, if they knew exactly what they wanted, and they understood the print industry, then they would do something more self-serve. Because the gratification is instant in that situation versus we are very hands on, and we work directly to support the creator to get them to the point in which they're going to be really happy because they just don't know how to do it.

LS: Alright, so I think at this juncture, let's kind of just explain, if you don't mind, the two different type of system. You said, one is self-service, and one is very much working with you and your team.

DH: A self-service platform like Teespring is you go in, you log into their site, you upload your art, and you're essentially on rails that take you to an ends page that allows you to sell something to your audience. It's fast, it's convenient but there are no checks, meaning they're not going to stop you from trying to make something. And if it doesn't come out well, that's your fault. That's not anybody else's fault, but your own. So there are quite a few of those platforms, I would say Teespring, Redbubble, spreadshirt, there's quite a few of those.

Then on the other side, you have us who are very full service content and the ideas. We are there to devise a merch strategy, right? Not research. That's really what they got. It's comprehensive from designing something to figuring out what is the product assortment that we're going to do, to how are we rolling and launching this to your fans, to training you to promote properly, so you can get the most sales. And then following up to talk about performance and understanding what can we do better next time? Because that's the big question that I think a lot of creators deal with, is, I'm not so sure if this is going to do well. And if it sold 100, is that good or is that bad? And how do I get better. And that's where we really drive a ton of value. Is making sure that we guide them through the entire process, give them a strategy, and then reiterate every single time to get better and better.

LS: Cool, okay. If it goes right, well done. If it goes wrong, well, it's down to you. Nobody's going to stop you from printing something that maybe you're not even allowed to print, like copyrighted materials, things of that nature. We've seen a lot of that in various stores. But then on your side, it's very different. It's very hands on, the process is slower and then the value is all about a strategy rather than, hey, let's go print 50 shirts at your local FedEx store. Right?

DH: Yeah, it's about strategy and equality, that's really what it's about.

LS: And then it’s kind of circling back to the whole, I don't want to disappoint my fans. But do you like the idea that you did mention earlier, which is, it's okay to test. Maybe you've got a logo, maybe you've got a little character, maybe you got a sign, test it with an undermanned print kind of service. Maybe your audience doesn't actually care. Maybe they do. Maybe they sell lots of that, in which case, it's a good indicator to say, okay, this could be a revenue spinner if I do this correctly, let me get ahold of crowd mate, and let's maybe see if we're able to work together.

DH: We definitely want to make sure that we help creators come from all angles and all levels and experience when it comes to merchandise as well as the growth of their channel. And we do run into situations where the Creator is nervous. And I think the way YouTube has been designed has really created a lot of anxiety to the growing aspiring YouTube creator of making a mistake, right? We also coach our creators into saying, like, look, sometimes we don't know what the right design is going to be, especially when the creator is a little bit more ambivalent.

So we suggest testing. And we're like, look, let's just go out there and do this. Let's find out what is resonating with your audience. And the next time we do this we'll revise, we'll do it better, we'll promote better, we'll have a design that is better in aesthetic, that makes sense. But we absolutely encourage testing at all times.

LS: This is good advice because you're right. I mean, we are all scared of YouTube. We are scared to post something new, let's be honest. We've heard horror stories of people trying new thumbnails or new titles, new ideas, and it just goes horribly wrong. In which case, testing this kind of almost frowned upon, even though we know that you really should. So this is a good litmus test? Do people like it or not? And then being able to really kind of take it to that next level. And is it possible to take it to that next level? In other words, can you make some good, good money off your merch?

DH: Yes. The ones who really nail this formula, do very, very significant numbers. Much larger than their sponsorship sometimes.

LS: Whoa, much larger than like a brand deal or sponsorship?

DH: Yes. We recently did one for a large creator, and he did very well.

LS: I love this whole NDA thing that you kind of trying to skirt around. But we appreciate it, we do appreciate you being here, and kind of sharing openly as much as you can, don't want to get you into trouble, of course. And you know, we just want to understand this kind of world, because for many people, this will be new.

Many people obviously have seen some of their kind of really big creators and they're loving what they're doing. And we've all felt that whole, well, let me support the creator by buying that shirt, buying the hoodie. And at least I've got a part of him or her that I feel more connected to, to that channel. But also I know that I'm contributing to help that creator really make more content, which I love. So we all have been on this side of the equation. But now, do you think there's any kind of red flags that would suggest, look, we just don't think this is going to do well. Do you ever walk away from deals which is just not right?

DH: Yes, all the time. I don't want to give away too many secrets. We absolutely believe in the development and the investment in our creators. There was a time when Crowdmade only worked with the very, very largest YouTubers, and I mean, double digit million YouTubers. And we only had a handful of clients. But over the years, we've just found so much gratification, I think it's probably the best word, on working with aspiring channels. And again, none of them are small right? If they're in the 10s of thousands of subscribers, but it's very meaningful to us to work with these growing creators and to see them grow because it is just amazing how fast some of them grow. But we pride ourselves on developing relationships with our creators, real ones.

We will walk away from deals where it is too transactional, because the only thing they care about is the money. And that is a recipe for disaster in your business. We'll walk away from those heavily transactional relationships, we will walk away from relationships, or we just won't start them with those who aren't willing to communicate. Because again, I said it's really, really easy to do that merch, and the first way to put it on a bad path is not being open to communication. So I won't say how I make those decisions but do we do turn down creators, some of them very large, just because those kinds of situations. Well, it won't be good for the creator, it won't be good for us, and it definitely won't be good for the fans. So we just won't except that kind of situation. So that's on the Crowdmade side.

For the creator who's trying to see if there's a red flag, right? We asked this question a long time ago, why are you trying to do merch? And once the big red flags was when he just said, to make money. Because at that point in time, you strip away a lot of the creativity and the fun. And when you really focus on doing something great for your fan, it'll reciprocate, right? So one of the red flags is looking at things like you're really just trying to make money out of this. And oftentimes, I really only hear that from the smaller channels, I rarely get that from the larger channels. I asked every creator that we work with, I want to know how they got started. And none of them have ever said for money. Not a single one.

And you know, it's self selecting the kind of creative team to with us, right? But they all say it was because I wanted to be better at building a skill. You know, I was an introvert and I really wanted to try get out of my shell, or I needed an outlet for creativity. And the next thing you know, here I am. But I don't think it was so accidental, because these people are so focused on just doing the best content they can. And the money just follows after. They're not money first. And I think that's why a lot of the creators we work with have such deep engagement, right? Again, it's very self selecting, and are also successful, because they care about those things first.

LS: Do you have these certain niches or industries that maybe do better, like a gamer would perhaps do better than animator? Or does it really just depend on each individual's community?

DH: Great question. Well, these are really pointed. We've worked with creators from all walks of YouTube over the years, and I would say it's less about the subject, and it is more about the relationship that the creator as a person or a character has with their audience. And let me give you a good example. There are really great how-to channels on YouTube. But a lot of them for their massive sides, there is no connection with the person making the content, because sometimes it's just like, you see some hands and there's no voice. So it's more about that connection with a person or a character. So animators, they have great characters, right? And you've got some wonderful personalities for daily vlogging, comedians like Jack where they are relating to him, or her and that person more than the content itself. And that's really kind of a big key to merchandise.

LS: It's about making that connection. But you bring up a very interesting point, that maybe a utility channel or how-to channel, if you have a how-to channel, how do I unblock my toilet, this is my favorite example. The odds of someone buying your hand in the toilet, t-shirts not so much. But then we have a problem. Like I have a tech channel as you know, we talk about the latest phones and gadgets. But there's no worst kind of subscribers are going, the views are great, and we could have signed to build this community. At the end of the day people are there for an answer. I am stuck. I don't know if I should buy this phone or not. I don't know how to do this thing on the computer. Can you help me? It's very difficult to build a community who will buy something outside of that. It's just different mind set. You're not there to be entertained, you're there to learn. Maybe a phone case, maybe would make more sense, in my case, than something like Jack who maybe his phone case doesn't make sense in his case. Would you find that to be correct?

DH: Yeah. There's a lot of, I would say cooking channels, they are entertainment, but they're in that how-to category, but they have some personalities there. And those personalities are very powerful.

Thinking in tech, we could talk about channels like Linus Tech Tips, or Marques Brownlee, these guys are personalities. Marques is incredible because of his style, right? People will buy to be like that creator, and to be associated with that creator, because they have very strong personalities. But it's primarily review to get views, unless that person particularly stands out, you're right, it is a little bit more difficult for a how-to channel.

LS: And maybe on the smaller ... I mean, Marques and Linus Tech Tips, these guys are huge. And they've brought a huge community, which kind of respects them, they've obviously earned it, nothing came easy, contrary to popular belief. Then the community appreciates them and wants to support them, in which case it's fine. So I guess my point is that then maybe even with in the how-to genre, then maybe a differentiation, based on your size, based on your community, your engagement, that maybe even starting out, you might be kind of struggling at the moment, but don't rule merch out all together, just because you're a how-to channel, it could come at a point that makes sense.

DH: We work with a lot of creators who started in one thing and through the trial and error and tribulations of YouTube, they found something else over the years, and then it really took off for them. So I wouldn't say rule it out, I would say make sure you understand what your expectations are. That's kind of the big thing.

LS: Good and maybe put on a roadmap that maybe start with a shirt in point A. But as you get bigger and more engagement, maybe then you start transitioning into something more. Where do we kind of look at the overall categories within the merch, is anything that sticks out that sells more than others. What do you sell more than, I don't know, pencil case. Do even people even have pencil cases? Not sure.

DH: We make them. The answer are black t-shirts, black unisex t-shirts. So everything and absolutely huge margin.

LS: Kids at the insider information rocked it. Make black shirts, put your face on them. And now, kind of you talked about earlier about the creator actually coming along for the ride and really understanding that it is up to them to promote their own material. I mean, I know it sounds obvious when we say it out loud. But it's amazing how many people just do not understand that as a concept. Can you give us some examples of people who are doing it really well, maybe not people, just kind of maybe the idea of what they're doing to promote their own material, obviously don't want to put you in an awkward position. But something that say, hey, this works really well, when created as A, B and C at an event, this works really well, things like that.

DH: Okay, The real answer is short and concise. Direct to the point where we tell our creators because they are very creative people, and they're trying to oftentimes spin things or do something really interesting for you. And we'll talk about some other issues that they often have. With contents if you do a 10 second mention at the beginning of your video, you just say, "Hey, I've got this new product that came out, it's only going to be available for a little while, if it's going to be a limited item, go check it out before it's gone."

Literally, that's it, and then you go on to your regular content, that outperforms everything by just a massive, massive margin versus the creative stuff we've seen over the years. The other thing is, we have the data to show that a promotion at the end of essentially, a seven or 10 minute video almost has the impact of not having it at all. When our creators don't have a clear path to what they want to do, we always guide them into short and simple. It's really effective. It's worked time and time again and there are a handful of cases of creators who've done other things really successfully. But they also have very unique audiences. But that would be the key advice. Short, simple, with a clear call to action.

LS: As creators, just the definition of that word is, you don't want to keep it simple. You want to create, you want to create a story around and then you overthink it. And guess what people, just want to know what you have and how cool it is. And where they can buy that call to action is so powerful. And say, "Hey, you want a shirt just like the one I'm wearing? This is what you are going to do." And that just works. Because guess what, people just want a shirt just like that.

DH: It's so short and simple. It's perfect. Creators are oftentimes very surprised, they're very surprised to hear that. And we have many situations where there are a handful of opportunities where a creator will do multiple video promotions in the same campaign. And we will convince them to do something short and sweet versus their big rollout that took them half a day to film or edit. And then they will see the results. And it is so surprising to them almost every time. So that to me, by far the best advice you can have.

LS: Great. So keep it short. Keep it simple, clear call to action, black shirts, okay? That's what we need to know. I kind of jokingly refer to copyrighted materials early on. Are there anything that we shouldn't be putting on kind of merchandising something that absolutely does not work under any circumstances, stay away from that you will get into trouble.

DH: Disney stuff. There are a handful of brands out there who are very, very litigious. And we don't run into this issue because we have, we either do the art in-house, or we work with the creator to make sure that we're looking at the art. That there's no obvious infringement. And there's a fine line between infringement and parody, right? And so that's always a difficult thing. But I would say if you're using somebody else's character or, in any way, you need to stop and ask somebody if it's okay.

Because the likes of companies like Disney will absolutely send cease and desist orders and there's just so many counterfeits out there. We deal with it all the time too, where are our creators get counterfeited. And it's such a painful thing to go through for a creator. And we spend time making sure we can take down some of these things. But I do feel for the brands. So yes, if it has to be really direct to Disney stuff stay away. And anything related to that kind of stuff. But in general you know when you've taken something from somebody else, and you have to ask somebody if it's okay.

LS: And get it in writing. Chats at a bar after 13 tequilas is probably not the best time. Get it in writing, so you got something to fall back on. And then guys, if you think about it, if somebody ... You might think well, Disney's got all the money in the world, why should I care if I make a couple of bucks? Well, it's not about that. It's about imagining that you get that big, and somebody takes one of your characters that you worked so hard to develop, and they slap it on a shirt, and they make a couple of bucks of your work. It's just not right. They don't own it, they shouldn't do it. You don't own it, you shouldn't do it, which is why we never encourage pirated software - how can I get this video editing suite for free? Forget it, pay some money, some developer has worked really hard to get it out there. This is just not yours to take. And it's literally is stealing. So simple, simple as that. What's got you really excited kind of about the whole merch industry, this game?

DH: For us, Crowdmade has always been ... We've always looked at ourselves as a company that supports our creators to create and connect. And nowhere in there, do you hear the word merchandise. We are best known for our merchandise but this year, we are working on adding some really strong value add services to our creators because they've asked them, asking these things from us. And so they're going to come out sometime this year. I can't talk about them yet. I think it's going to be great. We want to change the way the support industry for YouTube creators works. And I think we've got these incredible relationships with our creators who are so open and honest with us. And how do we bring these services to life? What do they look like? How are they really helping creators? So I'm really excited about that.

And the other thing, I think, on a high level that I'm really excited about is the future of creators. And I've been doing this for a half of years now. And the shift in the way people look at YouTube in whether it is the people consuming the content and every day there are more people cutting the cord with traditional cable and watching this kind of short form digital content, but also the creators themselves. And what makes me super excited about that are the number of children who now look ... Not just children, but young adults who look at YouTube as a real viable career path. So the number and the types of creators that will be coming over the next few years I think it's really exciting. I think we're going to see things that we've never seen before. As this generation grows up and who are immersed in this culture, as well as being able to support them along the way. Whether it be education or coaching or merchandise or any one of these things. That's what has me super excited over the next few years.

LS: Well, that definitely sounds like something we want to be watching. Dave thank you for spending some time with us.

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